Is the Euro Topping Out?

For the most part European economic data was weak.  Manufacturing PMI accelerated but service sector PMI deteriorated and French consumer spending fell by the biggest amount in over a year.  ECB President Trichet also said that he is opposed to brutal currency moves while Airbus is complaining loudly about the damage of a weaker dollar.  It is important to point out that Trichet did not call the latest move in the Euro brutal, but simply indicated his discontent with volatility in the currency markets in general. The pressure is heating up for the central bank president to do something about the currency but his reluctance to do so reflects what must be very strong inflationary pressures.  Eurozone and German CPI are due for release next week.  They could be particularly market moving because strong numbers will indicate that the ECB has their heads in right place while weaker numbers will raise doubt as to whether they are putting their focus in the wrong places.  In addition to the inflation data, we are also expecting the German IFO report, retail sales, unemployment and Eurozone Retail PMI.