Euro: Eurozone Economic Resilience Evident in Current Account Data

Even though the Euro gave back nearly all of its intraday gains, next to the Japanese Yen, it was the best performing currency against the US dollar. This resilience was thanks to the much stronger than expected current account data released this morning.

The market was completely caught off guard when the current account shifted from a deficit of -3.7 billion to a surplus of 5.4 billion in the month of March. This is yet another piece of evidence that the strength of the Euro has had a limited impact on the overall economy. Instead, ECB officials continue to remain very hawkish. According to the Financial Times, ECB member Weber said that “the current cycle of interest rate increases has not yet reached its end.” This clearly indicates that the central bank is on track to raise interest rates on June 6. German and French retail PMI data is due for release tomorrow. With business confidence holding steady, there is no reason to expect weak consumer confidence. Meanwhile the Swiss franc has performed extremely well after the UBS consumption index hit a 5 year high. The trade surplus fell short of expectations, but the market is less interested in trade ahead of the GDP and CPI data later this week. We expect the weakness of the Swiss franc to have boosted both growth and inflation.