The euro is currently mixed. The common currency is flat against the US dollar and Canadian dollar, while higher against the Japanese yen. Movements in the euro are fairly limited as markets await US inflation data (set to be announced later today). As consensus estimates call for inflation to accelerate to 2.2% (from 2.1% in the previous month), there is a concern that the Federal Reserve may hike rates more than three times this year. If inflation is higher than estimates, expect the US dollar to strengthen (and the euro to weaken) accordingly. Turning to news from the Eurozone, the Eurogroup decided to finalize a bailout plan for Greece within 100 days. The group has also decided to upgrade the European Stability Mechanism into a permanent European Monetary Fund. The Fund will be used to for bailing out failed banks in the future. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is flat and trading above 1.2320. The euro is up against the yen, with EUR/JPY trading above 131.740. Finally, the euro is up slightly against the pound, with EUR/GBP above 0.8870.
This is relatively light week for economic data from the Eurozone. Eurozone finance ministers agreed on a Greek bailout package and financial stability mechanism at the most recent Eurogroup meeting. On Wednesday, we'll see the German harmonized index of consumer prices and the consumer price index for February. From the Eurozone, we'll get industrial production and employment change figures. The ECB's Draghi and Praet will also be speaking on that day. On Thursday, the ECB's Lautenschlaeger will deliver a speech. On Friday, we'll see German wholesale prices and the Eurozone consumer price index and labor costs. Last week, ECB President Draghi disappointed speculators looking for a more hawkish outlook on monetary policy.
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.