The euro is stronger this morning after rising yesterday. Recently released December ECB minutes suggest that the Bank will be looking to communicate a change in monetary policy in 2018. This it the first time the ECB has acknowledged that improving Eurozone growth is likely to lead to tighter monetary policy. In German coalition news, Reuters is reporting that Merkel and the SPD have agreed to progress to formal coalition talks. As the prospect of another 'grand coalition' now looks more likely, the euro strengthened following the announcement. Looking at economic data, recently announced industrial production figures were higher than estimates (3.2% vs. 3%). The Eurozone figures follow very strong industrial production growth numbers from Germany announced earlier this week. As the euro bull market continues, our short-term and medium-term outlook on the currency remains bullish.
EUR/USD is higher this morning and currently trading above 1.2060. The euro is up against the yen, with EUR/JPY trading above 134.20. Finally, the euro is up against the pound, with EUR/GBP above 0.890.
This is a relatively light week for economic data relating to the euro. Retail sales were higher than expectations (2.8% vs. 2.2% expected). Consumer confidence came within expectations (0.5%) while economic sentiment (116 vs. 114.8 expected) and business climate (1.66 vs. 1.51 expected) survey results were better than expected. The Sentix index was also above forecasts (32.9 vs. 31.5 expected). German trade balances were higher than estimates (€22.3B vs. €20.9B expected). Eurozone unemployment matched expectations (8.7%), while German industrial production beat estimates by a big margin (5.6% vs. 4.0% expected). Eurozone industrial production (3.2% vs. 3% expected) beat expectations. Last week, both manufacturing PMIs and inflation met expectations.
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.