The euro continues to climb higher after strengthening during the holiday season. The common currency has been especially strong against the US dollar. While the previous US dollar shortage led some to believe that the euro would sell off in the final weeks of 2017, these fears were ultimately misplaced. After the European Central Bank and the Bank of Japan tapped the US Federal Reserve's USD swap line, the dollar shortage eased. Today, the euro continues to rally as Eurozone GDP growth remains strong and the market expects the ECB to end its quantitative easing program later this year. Given the convergence between US and Eurozone monetary policy, the euro is gaining as a result. Political risks including upcoming Italian elections, German coalition talks and the independence movement in Catalonia have had a limited impact on the currency. Our outlook on the currency remains bullish across all time-frames.
EUR/USD is higher this morning and currently trading above 1.20. The euro is also up against the yen, with EUR/JPY trading above 135.40. Finally, the euro is flat against the pound, with EUR/GBP above 0.8890.
This week's Eurozone economic data releases include CPI figures and survey results. Later today, we'll see EZ and German manufacturing PMIs. On Wednesday we'll see German unemployment. On Thursday we'll see Markit services and composite PMIs. Finally, Friday is the key day when we get Eurozone consumer price index and producer price figures. We'll also see German retail sales on Friday. Prior to the holidays, Eurozone CPI data met expectations (1.5%).
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.