The euro is mixed today. The common currency is flat against the US dollar, higher against the Australian dollar, while selling off against the yen. Risk sentiment is currently falling as fears of a trade war rise. As we wrote in our US dollar daily update, a trade war is becoming more likely after Trump administration officials asked the Office of the U.S. Trade Representative to target more than $30b a year worth of Chinese imports. So far, the Eurozone has not responded to US steel and aluminum tariffs that will be implemented shortly. Only Canada, Mexico and Australia have received an exemption from the tariffs.
Turning to recent events and data, the euro sold off yesterday after Draghi commented that monetary policy will remain "patient, persistent and prudent". While expectations were high for the ECB to indicate an end to its asset buying program in the first quarter of 2018, all indications so far point to a continuation of the status quo. In other news, Eurozone industrial production was significantly below estimates, suggesting a weak pace of growth this quarter. Recent data from the economic region has been fairly disappointing. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is flat and trading above 1.2360. The euro is down against the yen, with EUR/JPY trading above 131.130. Finally, the euro is down against the pound, with EUR/GBP above 0.8840.
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. The German harmonized index of consumer prices (1.2%) and the consumer price index for February (1.4%) met expectations. YoY Eurozone industrial production (2.7% vs. 4.7% expected) missed expectations, while employment change figures (1.6%) met expectations. ECB speakers including Draghi and Praet suggested a continuation of the status quo. Later today, 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 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.