Fundamental Analysis: Euro Holding after Lukewarm Data

Fundamental Analysis: Euro Holding after Lukewarm Data

The euro has been mostly stable in today’s session so far after mixed statistics from the eurozone. Weaker German data came against slightly better figures from the euro area as a whole. Meanwhile last weekend’s EU Parliament election did not bring a strong result for populists as some analysts had feared.

Euro-dollar is currently holding at today’s opening of $1.119, just below the key area of $1.12. The common currency has moved up slightly against the pound to 88.4 pence. EURJPY has been similarly immobile at around ¥122.46.

Data and elections both unremarkable

Politicians as well as some analysts of financial markets had warned last week of a surge in populists in the European Parliament. However, this has not been the case at all based on provisional results. The populist group, Freedom and Direct Democracy, gained only six seats. ENF’s nationalists failed to gain any additional seats. The biggest winners from the elections were the greens (up 19 seats) and ALDE, the centrist and pro-business group (up 42 seats).

These provisional results are fairly positive for the euro. This is because the common currency tends to do better when European elections, both national and Union, return larger numbers of moderates.

EU data this morning hasn’t had much effect on the euro. Consumer confidence in Germany and business confidence throughout the eurozone were down slightly. On the other hand, industrial, economic, and service sentiment in the eurozone looked better. Although less than stellar, recent figures from the eurozone are overall notably better than last month.

German job data in view for the euro tomorrow

Although this is generally quite a big week for German data, the most important day is probably tomorrow. First up is harmonized unemployment at 06.00 GMT; the consensus is stable at 3.2%. Then the eurozone’s biggest economy releases May’s unemployment rate and change, both at 07.55 GMT. The rate is expected to be the same, 4.9%, but analysts are predicting a slight improvement in the latter figure to about -8,000.

Friday’s data is also likely to have some effect on the euro, especially German inflation. Preliminary annual inflation for May is set to decline about half a percent to 1.5% at 12.00 GMT, the last major European data of the week.

The Bank of Canada’s rate statement tomorrow afternoon at 14.00 GMT is the biggest news in currency markets this week. Traders of EURCAD should be prepared for very high volatility around this time. Preliminary American GDP data at 12.30 on Thursday is also a key release for EURUSD.

Apart from data, the summit of the EU’s leaders is an important event. Leaders of the EU are meeting today as part of the first round of nominations for presidencies of the bloc’s key institutions. Deciding the next head of the European Central Bank is a long process, but traders will be watching this news as it develops.

Data could generate direction for EUR

The euro’s fundamentals do not suggest any particular direction for most of its pairs. Tomorrow’s data could spur some movement for the common currency, though. However, traders should also watch important technical levels, especially EURUSD’s $1.12.

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