The euro is again mixed today - the common currency is slightly lower against the US dollar while trading slightly higher against the British pound. Yesterday, the euro made small gains versus major currencies including the US dollar and the Japanese yen. In recent history, the euro has served as a temporary safe haven from trade war fears. As we wrote in a previous edition of the US dollar daily update, the dollar (a traditional safe haven) has been relatively weak thanks to relative strength in emerging markets currencies.
Turning to recent news and data, Eurozone inflation figures were mostly in line with expectations (although core inflation was slightly below expectations). As Eurozone inflation and growth slow down, the region's bonds have been performing quite well. While the euro is in a bullish trend today, we expect the common currency to enter a neutral trend if economic data continues to decelerate. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is down slightly and trading above 1.2270. The euro is flat against the yen, with EUR/JPY trading above 131.10. Finally, the euro is up slightly against the pound, with EUR/GBP above 0.8720.
Looking at economic data from the Eurozone, we’ll see figures relating to sentiment and inflation. German retail sales (1.3% vs. 2.2% expected) missed expectations by a wide margin. The final-take on Eurozone Markit manufacturing figures for March (56.6) met expectations. The Eurozone consumer price index for March (1.4%) and Eurozone unemployment for February (8.5%) met expectations. German factory orders for February (3.5% vs. 6.3% expected) missed expectations by a wide margin. Later today, we'll see Eurozone services and composite PMIs (March). We’ll also see Eurozone retail sales (February), the producer price index for February and the ECB’s monetary policy meeting accounts. On Friday, we’ll see German industrial production (February) and Eurozone changes in employment (Q1). Last week, German inflation missed 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.