The euro is mostly lower today after weakening yesterday. Looking at recent events, Eurozone PMIs announced yesterday were below estimates. With composite PMIs tracking at 57.5, the Eurozone's economy continues to expand, but at a slower pace relative to consensus expectations (58.5). Beyond economic data, minutes from the US FOMC suggested an upgraded outlook for US growth and inflation. As the risk of more rate hikes this year increases, the US dollar and US Treasury yields are rallying as a result. In response, the euro is weakening as the pace of US monetary policy tightening may be accelerating. As the euro runs out of momentum, we will downgrade our short-term outlook on the common currency to neutral later today. Yesterday, we argued that the longer-term euro bull market remains intact thanks to strong growth, monetary policy expectations and moderate sentiment. We remain mildly bullish on the euro as long as these factors remain intact. As such, our medium-term outlook on the euro remains bullish.
EUR/USD is currently down slightly and trading above 1.2260. The euro is down against the yen, with EUR/JPY trading above 131.850. Finally, the euro is up against the pound, with EUR/GBP above 0.8830.
Looking at economic data from the Eurozone this week, we’ll see a fair number of sentiment surveys and the Eurozone consumer price index. Spain’s Luis de Guindos was selected to be the next European Central Bank Vice President at the Eurogroup meeting. German producer prices were above expectations (2.1% vs. 1.9% expected). Eurozone consumer confidence missed estimates (0.1 vs. 1 expected), but the ZEW survey (29.3 vs. 28.4 expected) for the monetary union was ahead of expectations. Later today, an ECB meeting (non-monetary policy related) is scheduled. Composite PMIs (57.5 vs. 58.5 expected) missed consensus estimates. Later today, 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 runs out of steam, 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.