The euro is mostly higher today. Looking at the euro against its major global peers, the common currency is currently strengthening against the US dollar, the Japanese yen and commodity currencies such as the Australian dollar. Thanks to a rebound in global stock markets, the euro is rising as a result of increasing global risk appetite. In general, the euro tends to sell off during downturns. Turning to economic data, markets will be watching upcoming German inflation figures. If the figures rise above consensus estimates (1.4%), the euro should strengthen on tighter monetary policy expectations. In recent history, the European Central Bank has frequently commented on low inflation as a barrier to normalizing monetary policy. Turning to German coalition news, Angela Merkel has defended "painful" concessions necessary to bring about her fourth term in power. According to Reuters, the coalition agreement has been criticized by conservatives for pushing the SPD's agenda too aggressively. Later today, we will downgrade our short-term outlook on the euro as bullish momentum runs out of steam. Our medium-term outlook on the euro remains bullish.
EUR/USD is currently up and trading above 1.2280. The euro is up slightly against the yen, with EUR/JPY trading above 133.460. Finally, the euro is flat against the pound, with EUR/GBP above 0.8860.
Looking at Eurozone economic data this week, we’ll see German consumer prices as well as Eurozone GDP growth and industrial production. Wednesday is the big day, and we’ll get the German harmonized index of consumer prices. We’ll also get German and Eurozone Q4 GDP growth. Finally, we’ll also see Eurozone industrial production on Wednesday. On Friday, we’ll see German wholesale price index figures. Last week, Eurozone composite PMIs were ahead of expectations, signaling strong future growth.
As the euro pulls back, we are downgrading the currency to neutral in the short-term. Looking at various technical indicators, the currency is trading within normal conditions. This is based on a daily chart of the euro currency index.
As the euro continues to strengthen, we are upgrading the outlook to bullish in the medium-term. Note that the euro is currently trading within normal conditions. Our analysis is based on various technical indicators when looking at a weekly chart.