Although further stabilising business activity could make a case for a temporary EUR bounce, we doubt demand for the single currency will pick up markedly.
This week’s data should confirm that the Eurozone recovery is gathering momentum after the start of ECB QE. Improving sentiment (Eurozone PMI March 24 and German IFO on March 25) and a further lending pick up (M3 March 26) should some provide corroborating evidence. In turn, this could entice more investors to upgrade their EMU outlook.
It remains to be seen however whether EUR will benefit from such an upgrade given ongoing Greece concerns. Moreover, despite the recent upgrade of their growth and inflation projections, the ECB seems committed to implementing its QE programme. These two factors should provide sufficient weight to constrain EUR in the week ahead.
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