Market Overview

European Commission Forecasts Difficult Road Ahead For The Eurozone

European Commission Forecasts Difficult Road Ahead For The Eurozone

The euro gained some ground against the dollar on Tuesday after soft consumer confidence data took some of the shine off the greenback. The common currency traded at $1.3739 at 4:18 GMT as investors weighed positive and negative data from the bloc.

On Monday, the closely watched German Ifo survey showed that German business sentiment improved more than expected in January. The data helped boost morale as German companies seem to be cautiously optimistic about the year ahead. The index rose to 111.3 in January, its highest reading since July 2011.

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However on the other hand, the European Union released disappointing forecasts for the years ahead and confirmed fears that inflation within the bloc could become a problem. The Wall Street Journal reported that eurozone growth is expected to be 1.2 percent in 2014 and 1.8 percent the following year. After two years of contraction, many see that kind of tepid growth as being too slight to help bring down the region's sky high unemployment rates.

Marco Buti, the European Commission's director general, admitted that inflation remains a big concern in the region, since much of the bloc's recovery will depend on the stability of inflation. The commission expects to see inflation hover around 1 percent this year and rise to 1.3 in 2015. The forecasts fall far below the European Central Bank's 2 percent goal.

The ECB is set to meet on March 6, with investors divided on whether or not they think the bank will step in in an effort to combat falling inflation. In the past, bank President Mario Draghi has said the ECB is ready to act and will do what it takes to keep the eurozone on the road to recovery, but he also claimed the bank would need further economic data to make an informed decision.

Posted-In: European Central BankNews Eurozone Forex Global Federal Reserve Pre-Market Outlook Markets Best of Benzinga


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