Why Disappointing Data Has Had Limited Impact on the Euro

Euro helped by weaker US dollar

The euro-dollar (FXE) exchange rate closed at 1.2 on May 11, with the euro depreciating by 0.13% against the US dollar (UUP). The euro’s slide was halted despite weaker-than-expected European data thanks to the US dollar taking a breather.

European equity markets, which are tracked by the Vanguard FTSE Europe ETF (VGK), continued their positive streak with a seven-day rally and an eighth consecutive week of gains. Last week, the German DAX (DAX) rose 1.4%, the Euro Stoxx (FEZ) rose 0.42%, and France’s CAC 40 rose 0.47%.

Why Disappointing Data Has Had Limited Impact on the Euro

Euro speculative bets continue to decline

According to the Commodity Futures Trading Commission’s May 11 commitment of traders report, speculators have decreased their net bullish positions on the euro (EUFX) by 63 contracts, to 120,505 contracts from 120,568 contracts.

The outlook for the euro

There is a lot of important European data scheduled to be reported this week. Core inflation, set to be reported on Wednesday, is expected to rebound from its dip in April. If inflation slumps this month, markets are likely to factor in a dovish extension to the European Central Bank’s quantitative easing program, which could result in further selling pressure on the euro. German and European GDP and ZEW economic sentiment data is also scheduled to be reported this week. In the next part of this series, we’ll analyze why the British pound depreciated last week.