Euro dominated the foreign exchange space
The euro (FXE) scaled above the 1.12 mark against the US dollar in the week ending May 19, 2017. Demand for the euro shot up after the French elections and continued to increase as the US dollar (UUP) slumped. Weakness in the US dollar as a result of political uncertainty in the US led to greater demand for the currency.
The euro rose 2.5% against the US dollar in the previous week, closing at 1.12, the highest level the pair has witnessed since November 2016. European equity indexes (VGK), on the other hand, closed lower, tracking the negative risk-off sentiment across the globe. German DAX (DAX) closed 1.0% lower at 12,638 on May 19 as compared to 12,770 in the previous week.
Economic data continued to improve
Economic data from the Euro area continued to improve, adding to the positives for the Eurozone. European economic sentiment has improved according to the latest reports, and inflation continues to remain close to the 2% level. The European Central Bank members continue to debate whether or not to reduce monetary stimulus. Reduction of stimulus by the ECB could drive the euro higher from current levels.
Key events for the euro this week
Market participants will be focusing on the ECB this week, as ECB president Draghi and ECB members Praet and Coeure are all scheduled to speak. Investors will look for any signs of tightening monetary policy. In terms of economic data, Germany and Spain (EWP) will release 1Q17 GDP data, which investors hope will show continued growth in the Eurozone.