Lack of European Economic Growth Is Hurting the EUR/USD Pair
Economists call Europe’s economic growth “frozen”, especially against the thawing economy of the United States.
If this state continues, the Euro (EUR) will have a tough time gaining ground against the US dollar (USD). For Wednesday, the EUR/USD pairing is up 0.1255% to 1.0767. The pairing has been on the rise since yesterday, but analysts do not expect it to continue this upward trend.
The US has seen interest rate heights but no decreasing growth. Inflation could be diminishing in the near future, perhaps able to hit the Federal Reserve’s 2% goal before the end of the year. That rate stood at 3.4% at the end of 2023.
When growth manages to continue, particularly at a high rate, when inflation stays flat or decreases, this is what is called a Goldilocks economy by industry experts. Thanks to hawkish remarks from the Federal Reserve during a recent announcement, there looks to be few risks for increased inflation.
Europe Continues to Have a Poor Economic Outlook
Across the pond, Europe is experiencing stagnant growth. The inflation trend over there is about as optimistic as what the US is seeing, but there is concern that inflation could increase later on in the year. Unless something changes, the EUR/USD is going to have trouble gaining ground for very long. Growth across the Eurozone is nearly frozen with no immediate end in sight. The US dollar has done well in recent weeks, but that story could change if US inflation begins to rise.
There is hope that the central Bank of Europe will cut interest rates in March, which could help the situation. Unless economic growth happens across the continent, though, don’t expect the Euro to look bullish up against the dollar. Strong US GDP reports from the end of last year are helping to spur the dollar on higher and make it outshine its European competitor. Europe could use some of those if it hopes to beat the dollar for any stretch this year.
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