Dollar Rises as EC Slashes Growth Forecasts

The U.S. dollar edged higher against the euro on Thursday after the European Commission slashed its economic growth forecasts for the euro zone due to the expected impact of trade tensions and other challenges for the bloc’s largest countries.

In a quarterly economic forecast, the EU executive revised down its estimates for inflation in the 19-country currency bloc next year and also cut euro zone growth estimates for this year and next.

The euro was 0.08 percent lower against the greenback, on pace for its fourth session of losses.



It dropped earlier in the session after German industrial output unexpectedly fell in December.

Global trade tensions and growing public debt are hastening a slowdown in the largest countries of the bloc, complicating the European Central Bank’s plans for an interest rate hike this year and weakening the single currency.

“The report is just basically outlining what everybody now is very well aware of, that there is a marked slowdown,” said Alfonso Esparza, senior currency analyst at OANDA in Toronto.

“Everything is sort of compounding in this narrative that the central bank will probably not do anything for the rest of the year,” he said.

The dollar index, which tracks the greenback versus the euro, yen, British pound and three other currencies, was up 0.04 percent at 96.433, on pace for its sixth session of gains.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza