If the Euro manages to close above 1.45 against the US dollar, it could once again be on its way to hitting 1.50. Despite slightly weaker economic data, demand for Euros or distaste for US dollars continues to grow. Both German and Italian manufacturing PMI dropped last month even though the French and overall Eurozone number remained unchanged. Today’s rally may be partially due to comments from the French who in the past were the most vocally opposed to Euro strength.
The French Secretary of State said this morning that they are resolving their arguments with the ECB because they have realized that the stronger Euro is helping keep prices under control. This is the main reason why the ECB is so stubbornly hawkish. With oil prices climbing close to $96 a barrel, foreign nations are scrambling to keep prices under control. ECB President Trichet next week, who will be speaking after the bank’s monetary policy meeting, should share this sentiment; interest rates are expected to remain unchanged. Aside from that, we are also expecting service sector ISM, Eurozone PPI, retail sales, German manufacturing data and the German trade balance. As for the Swiss franc, consumer prices were stronger today, but that did little to pressure EUR/CHF. Next week, the Swiss unemployment rate and SECO consumer climate survey are due for release.