The euro is slightly lower today as traders wait for today's upcoming ECB event. Looking at the common currency against its major peers, the euro is the weakest against the Japanese yen and the Canadian dollar. While ECB President Mario Draghi is not expected to announce any significant changes to monetary policy today, there is a significant risk that he outlines a more cautious outlook for the future. Beyond the threat of US trade tariffs (which we covered in our US dollar daily update earlier today), recent economic data from the Eurozone has been disappointing. Manufacturing PMIs, economic sentiment and economic data from peripheral countries suggest a much weaker pace of growth in the near future. We covered the Eurozone's slowing economy in a recent commentary on the euro. As GDP growth rates decelerate, the ECB is less likely to commit to ending its asset buying program (i.e. there is a risk that Draghi goes "dovish"). Turning to GDP data, Q4 growth was confirmed at 2.7% year-over-year in figures released yesterday. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is down slightly and trading above 1.2390. The euro is down against the yen, with EUR/JPY trading above 131.30. Finally, the euro is flat against the pound, with EUR/GBP above 0.8920.
Looking at economic data from the Eurozone this week, we'll see Q4 GDP figures and hear from the ECB at an upcoming monetary policy meeting. Eurozone Markit composite PMIs (57.1 vs. 57.5 expected) and Sentix investor confidence (24 vs. 31 expected) both missed expectations. YoY Eurozone retail sales (2.3% vs. 2.1% expected) were ahead of expectations. The second take of Q4 GDP (2.7%) met expectations. Later today, the most important day, we'll hear ECB President Mario Draghi deliver the monetary policy statement and answer questions at a press release. On Friday, we'll see German industrial production and trade balances. Last week, Eurozone Markit manufacturing PMIs and headline inflation met 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.