Euro Area Economic Forecasts Have a Limited Impact on the EUR

There were no major stats from the Eurozone for the markets to consider today. Ahead of U.S inflation figures due out later, EU economic forecasts did draw plenty of interest, however.

According to the Executive Summary,

• The EU entered the New Year on a weaker footing than previously expected.
• After a soft-patch, forecasts are for the economic expansion to pick up pace in the second quarter.
• Forecasts are for the euro area economy to grow by 4.0% in 2022 and by 2.7% in 2023.
• Forecasts assume that the impact of the current wave of the pandemic will be short-lived.
• Expectations are also for most of the supply bottlenecks to fade over the year.
• Compared with the Autumn forecasts, inflation projections have been revised up due to persistently high energy prices.
• Inflation in the euro area is projected to peak in Q1 of 2022 and remain above 3% until Q3.
• Forecasts are for inflation to return to below 2% by 2023.
• The balance of risks to the growth outlook is broadly even.
• Looking beyond short-term uncertainties, improving labor market conditions, large accumulated savings, favorable financing conditions, and the full deployment of the Recovery and Resilience Facility (RFF) are supportive of an extended expansionary phase.

Market Impact

Ahead of today’s forecasts, the EUR had fallen to a current day low $1.14132 before rising to a current day high $1.14463.

In response to today’s forecasts, the EUR rose to a post-release high $1.14456 before falling to a post-release low $1.14344.

At the time of writing, the EUR was up by 0.12% to $1.14373.

Next Up

U.S inflation and jobless claims figures. The markets expect a further pickup in inflationary pressure force the FED into a more aggressive rate path for the year.