The euro ended the day mostly higher yesterday but is down this morning. Pro-independence political parties have fared much better than expected in recent elections in Catalonia. With most votes counted, separatist parties maintained their majority in Catalonia's parliament. While Spanish Prime Minister Rajoy hoped to eliminate the threat of Catalonian independence by calling new regional elections, the recent result suggests that his strategy was unsuccessful. Despite the news, the euro is only slightly weaker. In other news, German GfK consumer confidence figures met expectations. Our medium-term outlook on the euro remains bullish.
The EUR/USD exchange rate is now trading above 1.1850. Looking at EUR/JPY, the pair is down slightly today and is currently trading just above 134.40. The euro is down slightly against the pound, with EUR/GBP now trading above 0.8850.
This week’s Eurozone events and economic data includes Eurozone inflation and German survey data. Eurozone CPI figures met estimates (1.5%). German IFO survey results mostly missed expectations but were strong overall. Expectations (109.5 vs. 110.7 expected) and the Business Climate (117.2 vs. 117.5 expected) were below consensus estimates. Eurozone wage growth (1.6% vs. 2.1% prior) was lower than the previous print. German producer prices missed expectations (2.5% vs. 2.6% expected). German consumer confidence figures met expectations (10.8). Last week, the ECB upgraded its outlook for growth and inflation while maintaining its current monetary policies.
As the euro strengthens thanks to the strong outlook for its economy, we are upgrading the currency to bullish 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.