The euro is trading at $1.3712, down 0.04%, as the eurozone’s weaker-than-expected manufacturing and services purchasing managers index (PMI) reports from yesterday are still playing on traders’ minds. The services and manufacturing sectors in the region are still in expansion territory, but a fall in output is a reminder that demand is weak.
In recent weeks the European Central Bank (ECB) has mentioned it has the tools available to tackle deflation, yet it is reluctant to give details. I think the ECB is far from an interest rate cut or operating a stimulus package, but I wouldn’t be surprised if we see one or the other during the second half of the year.
In the short term, I agree with Chris Beauchamp; the euro is in an upward trend since the start of February, and we are on track for the $1.38 mark. However, in the medium term we could head towards the $1.35 level, as the eurozone continues to struggle with low growth and falling output.