Week In FX Europe – European Recovery Remains In Progress

Do not count the Euro-zone out just yet. Economic recovery picked up speed in Q4 – GDP +1.1, y/y and +0.3%, q/q. Numbers like this would suggest that the region has one once again found firmer footing after a couple of recessions pushed unemployment to record highs and led the periphery countries into all sorts of economic, political and social troubles.

The above expectations GDP headline is the third straight quarter of growth for the Euro-zone. Not surprisingly, the expansion was led again by the regions backbone – Germany. What’s so much more encouraging is that economic growth actually spread to the struggling regions – France, Italy and Spain. The numbers remain relative, they are a plus for Europe but certainly lag behind the economies of the US, UK and Japan.

Another concern would be, that despite the positive headline print, the actual economic growth rate remains below the rates that typically occur after recessions. It would suggest that Europe would have problems reducing their record unemployment numbers and issues increasing output that would help the peripheries reduce their debt load.

Where does that leave the ECB? It takes some pressure off the Euro-policy makers to make any immediate policy changes, but will they be pro-active and keep the “foot on the gas”? This week ECB members commented on the possibility of negative deposit rates and the market is pricing in further easing as early as next month.The ECB has remained the most ‘dovish’ of the party and it’s a matter of when and not if they ease monetary conditions further. However, after Draghi and company kept record low rates on hold last week they indicated they needed more time to analyze incoming data and GDP is one of them.


* JPY Gross Domestic Product
* GBP Consumer Price Index
* EUR German ZEW Survey Economic Sentiment
* USD Consumer Price Index
* CAD Consumer Price Index

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell