The euro is mostly mixed today. The common currency is slightly higher against the US dollar and the British pound while slightly lower against the Japanese yen. Looking at recent news, ECB President Mario Draghi spoke in front of the European Parliament yesterday. In his testimony, he was upbeat regarding the region's economy. However, he also stated that slack in the Eurozone may be larger than expected, slowing the rise of inflation. In typical fashion, Draghi delivered an outlook that was "cautiously optimistic" and did not significantly raise expectations for a change in monetary policy. Later today, we'll see data relating to Eurozone business/consumer confidence as well as German inflation figures. As we wrote in a commentary published yesterday, recent forward-looking data (such as sentiment surveys) have been disappointing. Combined with political event risk from Italy and Germany this week, the outlook for the euro is decidedly weaker. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is currently flat and trading above 1.2320. The euro is flat against the yen, with EUR/JPY trading above 131.70. Finally, the euro is up slightly against the pound, with EUR/GBP above 0.8820.
Looking at economic data from the Eurozone this week, we’ll see February inflation and manufacturing PMIs. Later today, German Bundesbank President Weidmann will be speaking – he is widely expected to replace incumbent ECB President Mario Draghi. We’ll also get Eurozone economic sentiment and consumer confidence. Lastly, we’ll see German February CPI figures. On Wednesday, we’ll see German Gfk consumer confidence and unemployment numbers. We’ll also get core January CPI and February headline CPI for the Eurozone. On Thursday, we’ll get February Markit manufacturing PMIs for the Eurozone. On Thursday, we’ll see German retail sales and Eurozone producer prices. Last week, Eurozone CPI figures met expectations while manufacturing PMIs were below consensus estimates.
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.