Euro lacks direction as Traders dont know what to do

Euro traders are looking for a fresh direction. Since the beginning of the month, the currency has been trapped within a relatively tight trading range as rising inflation meets weakening economic data. ECB President Trichet lent his weight to the debate last week when he confirmed the central bank’s focus on inflation. Although this has helped the Euro carve out a near term bottom, the tables have recently turned, leaving traders confused about where the Euro is headed next. Commodity prices have tumbled with oil prices off its highs and rice prices declining for the fourth day in a row. On the other hand, Eurozone economic data has been improving with growth in France and Germany rising more than expected in the first quarter. Strong consumer spending and rising trade balances have helped to spur growth in the first 3 months of the year, but it is important to remember that these numbers are backward looking, which is part of the reason why the Euro was unable to hold onto its gains following the report. The Eurozone trade balance is due for release tomorrow along with Swiss retail sales. The Swiss franc looks particularly bearish against the Japanese Yen which correlates with the market’s forecast for weaker consumer spending.