Is the eurozone crisis finally over? After a couple of years of recessions and stagnations, the stream of economic news coming from Europe seems to be improving now. Many European economies are recovering. At the same time, experts say 2014 is going to be a much better year for the eurozone. They expect a breakthrough.
At the same time, others are still skeptical about the eurozone’s shady recovery and excessive optimism since they do not believe that all those systemic problems in European economies are gone and there are no major deterrents for the European economy.
So, is it a short-term recovery or the beginning of a long-term rally? May the European currency eventually reach parity with the US Dollar? Let’s ponder on these questions together with Masterforex-V Academy.
Since the beginning of the year, the European economy has definitely improved its position in the global arena. The European Commission’s optimistic reports sound more like a declaration of victory. In particular, it is expected that the aggregate GDP of 28 EU states will grow by 1,4% this year. At the same time, the eurozone’s GDP (18 countries) is expected to gain 1,1-1,2% over the same period. Both European retailers and consumers start this year with more confidence about their prospects, which is a major sign indicating growth in the coming months. Now let’s take a look at some key macroeconomic indicators:
Economic growth. Germany is the outright leader here. Germany’s GDP gained 0,4% last year. On the one hand, this gain is hard to call an impressive achievement, especially as this is the lowest increase since the global crisis. On the other hand, the tendency is still positive and improving. Analysts say the German economy will accelerate to show a more decent increase this year, something around +1,8% (German business circles are even more positive, expecting +2%).
Apparently, being a locomotive of the eurozone economy, Germany seems to be improving the overall economic situation in Western Europe.
The French economy, the second biggest one in the eurozone, is also showing signs of recovery. The UK, which is not a eurozone member but a EU member, is also determined to contribute to the final effort of the EU aimed at coming out of the prolonged crisis.
As for Greece, Spain , Portugal and some other peripheral crisis-ridden European economies, the situation seems to be improving as well. The recovery is modest but real.
The Euro currency was successful in gaining strength against the US Dollar last week. The price moved within the 1.3775-1.3760 price range. The expert report that EURUSD has come close to 1.3800, a major level of resistance that is hard to overcome. At this point, the experts have defined the following levels of support and resistance:
Support - 1.3637, 1.3655, 1.3674 and 1.3692.
Resistance - 1.3776 and 1.3795.
Still, yesterday, EURUSD managed to go higher – above 1.3700-1.3720.
Export/import. As you know, Germany is often criticised for a huge export surplus. They say this is the major reason for the prolonged crisis in the eurozone. 2013 made some changes to this imbalance. In particular, there export growth slowed down from 3,2% in 2012 to just 0,6% in 2013. This year, the German export is expected to grow by 4,1% while the import is expected to boost by 5%.
Housing market. The German housing market has seen a bullish tendency for a couple of years in a row.
Consumer demand. Last year, it increased by 0.9%. The positive tendency will continue in 2014.
It is not accidental, that Germany’s highest credit rating was confirmed by all the rating agencies.
Despite all those tendencies in the German economy, it is too premature to be overconfident about the European economic recovery. It is obviously good that the eurozone’s biggest economy is strong. Still, there are 17 more economies in the eurozone and 27 more in the EU. Yet, they are not as strong and stable as one would think. And let’s not forget about the ECB’s monetary easing that may end up with a huge bubble that may cause serious problems when bursting. The bottom line, the crisis is far from being over despite positive signs. This cannot but affect the Euro currency. Another thing is that the US Dollar itself is unstable and affected by many factors as well. Therefore, we may well expect a real roller-coaster in global financial markets, including Forex (and EURUSD in particular). It is difficult to make long-term forecast amid economic uncertainty and instability. Still, one thin is sur: This is going to be a volatile year for EURUSD.
