The euro is mostly lower today. The common currency is the weakest against the US dollar, the Canadian dollar and the Japanese yen. Following yesterday's big move up, the euro has given up most of its gains and is now heading lower. Yesterday, German Bundesbank President Weidmann said that expectations for a rate hike in mid-2019 were "not completely unrealistic", sending the currency higher. Weidmann also reiterated his call for moving towards normalization soon (i.e. ending the asset buying program).
Today, recent economic data from the region has been fairly disappointing. German import prices were lower than expected, suggesting that the trade channel is importing deflation. In the Eurozone, sentiment indicators for services, economic sentiment and industrial confidence were all lower than expected. Private loan growth was also lower than expected. The recent data suggests that growth is deteriorating, and may even be reversing. Given the euro's high correlation with Eurozone growth, the currency is weaker as a result. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is down and trading above 1.2380. The euro is down against the yen, with EUR/JPY trading above 131.0. Finally, the euro is up against the pound, with EUR/GBP above 0.8780.
Looking at economic data from the Eurozone this week, we'll see German inflation towards the end of the week. German Bundesbank President Weidmann said that market rate hike expectations were "not completely unrealistic". German import prices (-0.6% vs. -0.3% were worse than expected). Eurozone sentiment data including economic sentiment (112.6), industrial confidence (6.4) and services sentiment (16.3) all missed expectations. Only consumer confidence (0.1) met expectations. Tomorrow, we'll see German GfK consumer confidence. Thursday is the most important day, and we'll see the March consumer price index and the harmonized consumer price index for Germany. The consensus forecast is for YoY inflation to accelerate to 1.5%. Last week, ZEW, IFO and PMI sentiment figures indicated worsening sentiment.
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.