EUR Daily Updates

01 March 2018

The euro is mixed today after weakening yesterday. The common currency is flat against the US dollar and the British pound while strengthening against the Australian dollar and the Japanese yen. The performance of the euro has been disappointing in recent history. Earlier this week, ECB President Mario Draghi provided a relatively downbeat assessment of inflation in the Eurozone, suggesting that slack may be higher than forecast. Furthermore, recent data (including IFO expectations and manufacturing PMIs) have been below consensus estimates. As we wrote in a longer commentary, political risks and weakening economic data means that we are less bullish on the euro's prospects today. Turning to recent economic data, Eurozone core inflation came in below expectations. The issue of weak inflation (as Draghi stated earlier this week), lowers the outlook for future rate hikes. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.  

EUR/USD is currently flat and trading above 1.220. The euro is up against the yen, with EUR/JPY trading above 130.30. Finally, the euro is flat against the pound, with EUR/GBP above 0.8860.

Looking at economic data from the Eurozone this week, we’ll see February inflation and manufacturing PMIs. German Bundesbank President Weidmann remarked that the ECB could end its asset buying program this year. Eurozone economic sentiment (114.1 vs. 114 expected) was slightly ahead of expectations while consumer confidence (0.1) met expectations. German headline inflation (1.4% vs. 1.5% expected) and HICP (1.2% vs. 1.3% expected) both missed expectations. German Gfk consumer confidence (10.8) and unemployment (5.4%) mostly met expectations. Eurozone February Core CPI (1% vs. 1.1% expected) was below estimates, although headline CPI (1.2%) met expectations. Later today, 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.

Updated 
Short term outlook
Neutral

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. 

Medium term outlook
Bullish

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. 

Updated