The euro is mixed this morning. Looking at its performance against major currencies, the euro is currently strengthening against the US dollar, trading sideways against the pound and weakening relative to the yen. Last Friday, the euro was sharply higher after news of a German coalition breakthrough was reported in various media outlets. Talks between CDU/CSU and the SPD party in Germany have been ongoing for quite some time. The euro has also been strengthening thanks to ECB minutes which suggested that the Bank is set to communicate a change in monetary policies. While enthusiasm for the euro continues to rise, there are growing concerns that a strengthening euro will further weaken Eurozone inflation and the performance of its export-oriented economy. One of the key risks to the ongoing rally is verbal intervention via ECB officials. Last year, ECB officials commented on the strength of the euro each time EUR/USD rose above 1.20. Our short-term and medium-term outlook on the currency remains bullish.
EUR/USD is higher this morning and currently trading above 1.220. The euro is down slightly against the yen, with EUR/JPY trading above 135.30. Finally, the euro is flat against the pound, with EUR/GBP above 0.8880.
Looking at Eurozone economic data and events, markets will be watching upcoming inflation figures. Later today, we'll get Eurozone trade balances. On Tuesday, we'll see German wholesale price index and consumer price index figures. On Wednesday, we'll get core and headline consumer price index data from the Eurozone. Finally, we'll see German producer prices on Friday. Last week, Eurozone economic sentiment and German industrial production growth was at multi-year highs.
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 looking overbought. 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.