The last few weeks have seen traders drastically shift their attention when it comes to Europe.The prospect of political upheaval and another showdown on Greece have seen confidence in the outlook wane considerably, translating to added downside pressure on the Euro. Nevertheless, despite the increasing likelihood of adverse scenarios transpiring, the for 2017 and 2018. Adding to the sense of optimism was higher revised projections for inflation alongside more upbeat employment expectations.
After giving up nearly 150 pips last week during a week with limited fundamental data delivered, the EUR/USD might have found its newest catalyst to continue the uptrend begun back in December. However, should the report issued by the European Commission be overshadowed by populist messages of anti-EU parties, it could see the EUR/USD pair come under renewed pressure, especially as breakup fears mount.Following ECB President Mario Draghi’s outline for how a country leaves the Euro Area, combined with comments from German Finance Minister Wolfgang Schaueble, it seems as though Europe’s leaders are already making preparations for the worst-case scenario.
Euro Climbs on Upgraded Projections
The Euro is modestly stronger on the session following the latest winter forecasts released by the European Commission. According to the report, Euro Area gross domestic product is projected to expand by 1.60% during the calendar year compared to the 1.50% anticipated during the estimates published during the fall.Besides 2017 metrics, 2018 growth projections were also revised higher to 1.80% from 1.70%. One of the key takeaways from the report was the more optimistic inflation predictions, with expectations that headline consumer price growth would rise to a 1.70% annualized pace from 1.40% predicted in the fall report.
In another positive mention, unemployment for the monetary union is expected to average 9.60% during the calendar year before falling to 9.10% in 2018.However, it must be noted that the EC report raised several notable risks to the outlook, with the predominant peril being political in nature. With Greece popping back onto the scene as the IMF and Germany fail to reach a compromise, voters are gradually shifting their views, accounting for a significant drop in popularity for German Chancellor Angela Merkel’s Christian Democrat Union party. However, apart from upcoming German elections, French campaigning and the approach of new Italian elections could see the economic outlook deteriorate significantly.
