The euro ended the day flat yesterday and is slightly weaker this morning. There have been a limited number of news stories and events that have influenced the euro in the past 24 hours. There have been no new updates with regards to German coalition talks or political instability in Catalonia. Instead, the currency is primarily trading as a function of movements in other currencies and in bond prices. The euro has been gaining against the pound and the yen recently, while trading sideways against the US dollar. Our short-term outlook on the euro is neutral, while our medium-term outlook remains bullish.
The EUR/USD exchange rate is now trading above 1.1770. Looking at EUR/JPY, the pair is down today and is currently trading just above 133.50. The euro is flat against the pound, with EUR/GBP now trading above 0.8820.
This week’s Eurozone events and economic data includes an ECB meeting and German inflation figures. Later today, we’ll see the ZEW survey from Germany. On Wednesday we’ll see German CPI as well as Eurozone industrial production. On Thursday we’ll see German and Eurozone Markit PMIs. More importantly, there is an ECB rate decision and statement scheduled for Thursday. Markets will be focused on the ECB’s statement as rates are widely expected to remain on hold. On Friday, we’ll see German wholesale prices and Eurozone trade balances. Last week, Eurozone Q3 GDP growth beat expectations.
As the euro weakens relative to the US dollar, we are downgrading the currency to neutral in the short-term. Looking at various technical indicators, the currency is trading within a normal range. This is based on a daily chart of the euro currency index.
As monetary policy expectations and economic growth power the euro, we are upgrading the outlook to bullish in the medium-term. Note that the euro is trading within normal ranges. Our analysis is based on various technical indicators when looking at a weekly chart.