The euro is mostly mixed today. The common currency is flat against the US dollar, while strengthening against the British pound and the yen. Last week, the euro enjoyed a strong rebound. Looking at EUR/USD, the pair rose above 1.25 last Thursday but sold off sharply on Friday. In general, the euro remains in a bull market thanks to strong economic growth and monetary policy tightening expectations. Turning to this week's economic data, markets will be focused on upcoming Markit PMIs and German GDP growth this week. If the data continues to suggest a sunny outlook for the Eurozone, the euro is likely to keep strengthening. For EUR/USD, another re-test of 1.25 is highly likely. Looking at political news, the outcome of Italian elections remain uncertain. While Silvio Berlusconi's center-right bloc are ahead in polls, they are unlikely to win a majority. The "5 Star Movement" remains the most popular single party, and is polling well in many key districts in Southern Italy. Our short-term and medium-term outlook on the currency remains bullish.
EUR/USD is currently flat and trading above 1.2410. The euro is up against the yen, with EUR/JPY trading above 132.220. Finally, the euro is up against the pound, with EUR/GBP above 0.8850.
Looking at economic data from the Eurozone this week, we’ll see a fair number of sentiment surveys and the Eurozone consumer price index. Today, a Eurogroup meeting is scheduled. The deepening of the monetary union is on the agenda. On Tuesday, we’ll see German producer prices, Eurozone consumer confidence and the ZEW survey for the monetary union. On Wednesday, an ECB meeting (non-monetary policy related) is scheduled. We’ll also see Markit PMIs (services, manufacturing and composite) on that day. On Thursday, we’ll see IFO survey data from Germany and see the ECB’s monetary policy meeting accounts. Friday is the most important day. We’ll see Q4 German GDP growth and the Eurozone consumer price index. Last week, German consumer prices met expectations.
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.