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.

• ECB Will Gain New Oversight Powers in November
• UK Recovery Threatened by Low Wages
• Bank of England Held Rates With No Statement
• ECB Held Rates As Inflation Fears Grow
• UK Economy To Grow 2.5 Percent in 2014
• UK Trade Deficit Narrows But Manufacturing Slows Down
• Europe’s Court Will Decide on Bond-Buying by ECB
• European Stocks Trading Lower As Germany Challenges OMT
• ECB Watching Global Market Turmoil Closely
• Rising U.K. House Prices Supporting Consumer Spending
• EU Ready For Record Free-Trade Deal With US
• BOE Holds Policy as Debate Continues
• ECB Ready to Wait Until March
• EU Prepared to Lift Tariffs on U.S. Imports
• U.K. Retailers Take Drastic Action
• Eurozone Retail Sales Fall in December
• Greek Bond Yields Drop After EU Could Extend Loans
• ECB Has Options to Deal With Deflation
• Italy Considering Suing S&P For Downgrade
• UK Construction Grows to Pre-Crisis Levels
• Greece To Get Tax Evader’s Info But No Lost Revenue From Switzerland
• European Business Activity Rises in December
• Hungarian Forint Next In Line To Suffer Heavy Declines
• European Banks Book In Worst Profits In Decade
• Greek Factory Output Raises Hope for Recovery
• Turkish FinMin Says Domestic Issues Taken Out of Context
• UK Manufacturing Rises in January Boosted by Exports
• Merkel’s Influence Growing in Europe
• Germany Rumoured To Be Considering Greek 3rd Aid Package
• ECB To Reveal Bank Balance Sheet Review in March
• ECB Now Faced with Deflation Concerns

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