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Worries Over Stronger Euro
Worries Over Stronger Euro

Worries Over Stronger Euro

Worries Over Stronger Euro

Ever since December last year, when it reached its low point, almost at parity with the dollar, the euro has not stopped rising. At the beginning of 2017 it was around $1.04: on Tuesday it managed at one point to break through the 1.20 threshold. The single currency’s sharp appreciation is causing concern in Europe, given that a very strong euro is not what the region’s economy needs at the moment, theconrer.eu reported. A strong euro makes exports more expensive and, as it makes imports cheaper, puts at risk the ECB’s plans for inflation to reach 2% (now at 1.5%) in the eurozone. In this respect, an economic think tank has predicted that “the euro’s appreciation would justify cutting estimates for inflation by between 30 and 40 basis points in 2018 and 2019.” Apart from the fact that the strong euro could drag on growth in the eurozone, something which explains the stock markets’ apathy over the last few months. The same think tank has evaluated the impact on GDP of the strong euro at between 20 and 30 basis points.

 

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