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Euro Rises After Update to Economic Outlook

The euro was strong today, rising against its major peers, after the release of the economic outlook for the eurozone and the European Union as well as economic data in Germany. The European Commission released its outlook for economic growth…

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The euro was strong today, rising against its major peers, after the release of the economic outlook for the eurozone and the European Union as well as economic data in Germany.

The European Commission released its outlook for economic growth in both the eurozone and the EU for this year and the next. The EC expects that the economy of the eurozone will rise by 3.8% in both 2021 and 2022. That is compared with the previous forecast of an increase of 4.2% in 2021 and 3.0% in 2022. As for the whole EU, the forecast predicts an increase of 3.7% (down from 4.1% in the autumn forecast) for 2021 and 3.9% (up from 3.0%) for 2022. The forecast said:

The euro area and EU economies are expected to reach their pre-crisis levels of output earlier than anticipated in the Autumn 2020 Economic Forecast, largely because of the stronger than expected growth momentum projected in the second half of 2021 and in 2022.

As for inflation, it is expected to climb from 0.3% in 2020 to 1.4% in 2021 but to decelerate slightly to 1.3% in 2022. The report had the following to say about it:

The inflation forecast for the euro area and the EU has increased slightly for 2021 compared to the autumn but is, overall, expected to remain subdued.

As for economic data, Destatis released a report that showed that wholesale prices jumped by 2.1% in Germany last month compared with the month before, demonstrating an increase that was five times bigger than the median forecast of a 0.4% gain. The prices were up 0.6% in December. Year-on-year, the index was flat in January.

EUR/USD was up from 1.2117 to 1.2149 intraday before pulling back to 1.2131 by 18:30 GMT today. EUR/JPY gained from 126.75 to 127.08. EUR/GBP advanced from 0.8758 to 0.8784.


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