Euro Rises After Eurozone GDP Showed 0.6% Gain in Q4 2017

Forex News

The euro strengthens against the US dollar, amid the weakness of the US currency. The euro/dollar is trading at 1.2452, up 0.17% today. Last week, the EUR/USD pair grew by 1% after the US President said that he would impose a 25% tax on imported steel and 10% on aluminum. This decision had a negative reaction from the EU and other US trading partners. Critics argue that the new tariffs will not be able to protect US jobs and provoke higher prices for consumers.

The Eurozone economy grew by 0.6% in Q4 2017. Eurostat said that the Eurozone GDP grew by 0.6% month-on-month and by 2.7% year-on-year. That followed expansion of 0.7% and 2.7% respectively in the third quarter. Overall in 2017, Eurozone GDP rose by 2.3%, the fastest rate of growth since a 3.0%rise in 2007. It had previously estimated 2017 growth at 2.5%.

Markets are focused on the ECB meeting, to be held tomorrow. Mario Draghi will also have a press conference. While the bank is not expected to alter interest rates tomorrow, markets are hopeful that the ECB will give some indication that it will wind up its sizable stimulus program later this year. The bank is likely to stress that the winding down of quantitative easing (QE) will be a gradual process in order to avoid any shocks to the market.

There is pressure on the ECB to tighten policy, as inflation remains weak. Recent indicators show that inflation in the Eurozone remains well below the ECB target of around 2%. The headline year-on-year inflation rate fell to 1.2% in February, down from 1.3% in January, which is the weakest level since December 2016.