The euro remains near 3-year highs against the US dollar today. Looking at the performance of the common currency against major peers, the euro is mostly mixed. The currency is flat against the US dollar and the British pound, while gaining against the yen. Looking at economic data, German harmonized consumer index prices, announced earlier today, met expectations (1.6%). Expectations for Eurozone inflation (to be announced tomorrow) remain fairly low (1.4%). Looking at news, Estonian central bank chief Ardo Hansson claimed that the ECB could end its asset buying program in one step assuming growth and inflation remain steady. As all indications from the ECB point to tighter monetary policy in the near future, the euro rally remains supported. Last year, the ECB verbally intervened when EUR/USD rose above 1.20 by flagging the risk of low inflation (a stronger currency tends to reduce inflation). So far, the Bank has refrained from making similar indications this year. Our short-term and medium-term outlook on the currency remains bullish.
EUR/USD is currently down and trading above 1.2220. The euro is down slightly against the yen, with EUR/JPY trading above 135.40. Finally, the euro is down slightly against the pound, with EUR/GBP above 0.8870.
Looking at Eurozone economic data and events, markets will be watching upcoming inflation figures. Eurozone trade balances were ahead of estimates (€22.5b vs €22.4b expected). German wholesale price index (-0.3% vs. +0.3% expected) were below estimates while consumer price index figures (1.6%) met expectations. Tomorrow, 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.