The euro area’s economy grew again in the second quarter despite an unexpected drag from Germany, where a manufacturing sector rebound remains elusive. Euro area GDP grew by 0.3% in the second quarter compared with the first. We anticipate slower third-quarter growth as a two-year manufacturing slump continues.
Energy, food, and core goods inflation are tracking at levels consistent with the 2% inflation target set by the European Central Bank (ECB). Services inflation has reaccelerated in recent months, but we remain confident that it will slow to target-consistent levels by the first half of 2025, driven by a softening labor market and moderating wage growth.
3.25%
Monetary policy rate
The ECB left its deposit facility rate unchanged at 3.75% on July 18, having lowered it by a quarter point at its June 6 meeting. Before that, the policy rate had been at a cycle high of 4% for nine months. We expect a quarterly cadence for future quarter-point cuts, starting in September, leaving the policy rate at 3.25% at the end of 2024 and at 2.25% at the end of 2025.
6.5%
Unemployment rate
We foresee the unemployment rate ending 2024 around current levels. However, lower corporate profit margins skew risks to the upside. Companies were able to sustain or even increase profit margins as the pace of inflation increased and thus could absorb higher wages amid tight labor supply. Such a scenario becomes less likely as prices normalize.
What I’m watching
After five quarters of stagnation, a modest return to growth
The euro area returned to growth in the first quarter of 2024, thanks mainly to higher exports. The growth outlook is an important factor driving underlying inflation trends and will be a key input into monetary policymaking. We expect quarterly growth rates of 0.3%–0.4% (nonannualized) for the rest of the year, which would leave euro area growth at 0.8% for 2024 as a whole.
We expect quarterly growth rates of 0.3%–0.4% (nonannualized) for the rest of the year, which would leave euro area
euro area
The euro area, commonly called the eurozone (EZ), is a currency union of 20 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU policies.
Overall, we expect the eurozone's gross domestic product to grow by 0.8% this year. Next year, private consumption should remain robust, and investments will likely strengthen, as financing conditions ease, driving GDP growth of around 1.4%.
Euro area foreign demand is projected to increase by 2.5% in 2024, 3.4% in 2025 and 3.3% in 2026. Growth in euro area foreign demand has been revised up for this year owing to stronger past outturns, while over the rest of the projection horizon it remains similar to the June projections.
Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 0.6% in the euro area and by 0.8% in the EU in the second quarter of 2024, after +0.5% in the euro area and +0.6% in the EU in the previous quarter.
EURUSD Rate Forecast for 2024 – Experts Predictions
No sharp volatility spikes are expected. The trading environment is expected to remain stable, with the asset's value reaching the higher boundary of the 1.0940–1.1010 range between August and October, followed by a decline to 1.0890–1.0880 in November and December.
Bullish Euro to Dollar price prediction from Bank of America
Bank of America (BofA) forecasts the Euro to Dollar exchange rate (EURUSD) to clear the 1.10 level over the coming months and rise toward its fair value. However, analysts caution this does not necessarily mean "the Euro will be supported on its own merits."
Euro to US Dollar Exchange Rate is at a current level of 1.114, up from 1.113 the previous market day and up from 1.066 one year ago. This is a change of 0.12% from the previous market day and 4.46% from one year ago.
The growth outlook is an important factor driving underlying inflation trends and will be a key input into monetary policymaking. We expect quarterly growth rates of 0.3%–0.4% (nonannualized) for the rest of the year, which would leave euro area growth at 0.8% for 2024 as a whole.
This decline in the euro's strength can be largely attributed to a pronounced discrepancy in monetary policies pursued by the European Central Bank (ECB) and the US Federal Reserve (Fed), resulting in a widened spread of their government bond yields.
On top of the list is Luxembourg. This beautiful but small nation scores high in the financial sector and the highest GDP per capita, making it the wealthiest country in Europe.
European governments were slowing economic growth because they had become extremely large without becoming commensurately efficient. European labor markets and social security systems were struggling to adjust to the reality of an aging population.
The United States was the second largest, with 15.5% of world GDP. The EU was in third place, with 15.2%. Among the 20 countries in the world with a share larger than 1% of the world GDP expressed in PPS, there were 5 EU countries: Germany (3.4%), France (2.4%), Italy (1.9%), Spain (1.4%) and Poland (1.0%).
The Euro Area Stock Market Index (EU50) is expected to trade at 4925.26 points by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 4828.58 in 12 months time.
Intraday bias in EUR/USD stays neutral despite current mild recovery. Focus stays on 38.2% retracement of 1.0665 to 1.1200 at 1.0996. Strong rebound from there will retain near term bullishness. Break of 1.1153 will indicate that larger rally is resuming through 1.1200 resistance to 1.1274 high.
Electricity generation in Energy market is projected to amount to 5.16tn kWh in 2024. An annual growth rate of 1.61% is expected (CAGR 2024-2029). Overall emission intensity in Europe is projected to amount to 295.60gCO2/kWh in 2024.
Forecasted interest rate on the ECB's main refinancing operations 2023-2025. According to the European Central Bank's survey of professional forecasters, the interest rate on the ECB's main refinancing operations is expected to decrease from 4.5 percent in December 2023 to 4.15 percent in 2024 and 3.29 percent in 2025.
Introduction: My name is Trent Wehner, I am a talented, brainy, zealous, light, funny, gleaming, attractive person who loves writing and wants to share my knowledge and understanding with you.
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