The EUR traded generally firmly last week, though the lack of a clear domestic directional factor keeps the currency in its largely neutral phase, and EUR pairs continue to be impacted more by global factors and specific developments with other currencies. The solid economic data prints last week also helped to support the euro, though without any longer-term implications.

This week’s light EUR calendar consisting of mostly (non-market moving) 2^nd tier reports means that this narrative will likely continue. Perhaps only worth watching will be the retail sales, and German factory orders and industrial production numbers, though they are too unlikely to have any impact on EUR exchange rates this week. The Covid pandemic in Europe is relatively stable for now, though the rise of the delta variant is a theme that traders are closely watching as an unexpected negative shock (such as new lockdowns) could negatively impact the currency.

For the long-term horizon, the recent dovish change at the ECB (with the new symmetrical 2% inflation target) is likely to act as a slight bearish factor in the months ahead, that will add additional pressure on the EUR in bad times and likely act as a headwind during good times.