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EUR Little Moved on Spring Forecasts, Further Downside Possible

EUR Little Moved on Spring Forecasts, Further Downside Possible

Nick Cawley, Strategist

Talking Points

- European Commission nudges 2017 Euro-Zone growth up to 1.7% from 1.6%

- Risks to the forecasts are more balanced but still point to the downside.

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for the week on the DailyFX Webinar Calendar.

Europe is entering its fifth consecutive year of growth, according to the latest European Commission economic forecasts.

In its Spring Forecast, the European Commission expects Euro-Zone GDP growth of 1.7% in 2017 and 1.8% in 2018 (1.6% and 1.8% in the Winter Forecasts). GDP growth in the EU as a whole is expected to remain constant at 1.9% in both years (1.8% in both years in the Winter Forecasts).

The report also highlights the rise in inflation, mainly driven by oil price rises, while core inflation – ex energy and unprocessed food prices – remains stable and “substantially below its long-term average.”

According to Valdis Dombrovskis, VP for the Euro and Social Dialogue, while today’s report points to improving growth and lower unemployment, the picture is very different from Member State to Member State.

“To redress the balance, we need decisive reforms across Europe from opening up our products and services markets to modernizing labor market and welfare systems. In an era of demographic and technological change, our economies have to evolve too, offering more opportunities and a better standard of living for our population.”

The single currency remained little changed on the release and continues its post-French election sell-off. After touching a high of 1.10241 against the US Dollar on May 7, the EUR has drifted lower and currently trades at 1.0885. A break below the 1.0850 level may open the pair to further downside.

Chart: EURUSD Four-Hour Timeframe (April 20 – May 11, 2017)

EUR Little Moved on Spring Forecasts, Further Downside Possible

Chart by IG

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

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