Too Early to Call a Bottom in EUR-crosses Despite CPI Data
- EURUSD trades back above 1.1200 after Feb EZ CPI beats.
- Technical structures of EURGBP, EURJPY remain bearish.
- See the DailyFX Economic Calendar for Monday, March 2, 2015.
Better than expected headline inflation data from the Euro-Zone in February comes as a welcomed development for the economically-beleaguered region, although it does not come as a complete surprise. After all, CPI readings from Germany at the end of last week beat expectations as well, and it was likely that the Euro-Zone's largest economy saw its own improvement spill over to the broader inflation reading.
In context of recent data, the February CPI report marks yet another report in which the actual data has come in above consensus forecasts. By the end of last week, the Euro-Zone Citi Economic Surprise Index was holding up at +51.0, coming off of its widest differential relative to its US counterpart since July 2011 (CESIEUR-USD ended the week at +97.7) and to its UK counterpart since March 2013 (CESIEUR-GBP ended the week at +41.7).
Evidently, though, recent data out of these developed economies hasn't been directly in line with what these economic momentum indexes are indicating on the surface; UK and US data hasn't been 'terrible,' and Euro-Zone data hasn't been 'great.' Rather, the expectations for the Euro-Zone are so low, and the bar for the UK and the US too high. Forecasters have gotten ahead of themselves.
With a heavy calendar over the next few days - including the ECB's second meeting of the year on Thursday - it would be naive to single out one piece of data (February EZ CPI above expectations) amid a stretch of data 'outperformance' and use it as a basis to declare a bottom in the EUR-complex, especially when the Euro has been unresponsive to the outperformance thus far. The technical developments seen in several EUR-crosses suggest countertrend moves taking place that may offer 'sell the rally' opportunities over the coming days; it's far too early to call a bottom in the EUR-crosses.
See the above video for technical considerations in EURUSD, EURGBP, EURJPY, and EURCAD.
--- Written by Christopher Vecchio, Currency Strategist
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