The euro is again mostly flat today - the common currency is trading sideways against all major currencies except the Japanese yen and the Australian dollar. The yen is broadly weaker thanks to rebounding risk sentiment, while the same factors are helping the Australian dollar. Yesterday, the euro traded in a similar pattern and also registered significant gains versus the British pound (following weaker-than-expected UK inflation).
Looking at recent news and events, headline inflation for March was slightly below consensus figures. Thanks to strengthening crude oil prices, the outlook for Eurozone inflation is improving, although slowing growth is a significant concern. Turning to recent trading in the euro, the currency has failed to benefit from the recent rebound in risk sentiment. While assets such as equities and commodities have done well since late March, the euro (a "risk-on" currency) has been mostly flat. As we explained in our recent commentary, slowing growth and crowded speculator long positions remain a significant concern for the euro. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is flat and trading above 1.2370. The euro is up against the yen, with EUR/JPY trading above 132.90. Finally, the euro is flat against the pound, with EUR/GBP above 0.8710.
Looking at this week’s economic data from the Eurozone, we’ll see sentiment data and final inflation figures for March. YoY German wholesale prices for March (1.2% vs. 1.5% expected) were below consensus estimates. The ZEW Survey for April economic sentiment in Germany (-8.2 vs. -1.0 expected) was at a 5-year low. The final reading for the Eurozone consumer price index for March (1.3% vs. 1.4% expected) was slightly below expectations. Later today, we’ll see the Eurozone current account balance for February. On Friday, we’ll see German producer prices for March and hear a speech from German Bundesbank President Weidmann. We’ll also see Eurozone consumer confidence for April. Last week, the second-take of YoY German consumer price index (1.6%) met expectations.
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.