The euro is mostly stronger today. The currency is gaining against the US dollar and the Canadian dollar, while trading sideways against the pound and the Japanese yen. Yesterday's inflation figures met the market's low expectations. Thanks to ongoing strength in the currency, future inflation figures are likely to remain low. Despite the specter of low inflation, speculators continue to bet on the European Central Bank ending its quantitative easing program later this year. As we have highlighted in our weekly take of the Commitments of Traders report, significant long euro positions in futures markets have been building up as a result. Our short-term and medium-term outlook on the currency remains bullish.
EUR/USD is currently up and trading above 1.2240. The euro is up slightly against the yen, with EUR/JPY trading above 135.90. Finally, the euro is flat against the pound, with EUR/GBP above 0.8810.
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. Core (1.1%) and headline consumer price index (1.4%) figures from the Eurozone met expectations. Tomorrow, we'll see German producer prices. 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 currently looking overbought. Our analysis is based on various technical indicators when looking at a weekly chart.