Eurozone’s February Surplus Shrinks, German Economy Shows Recovery Signs

In February, the Eurozone’s current account surplus dipped to €29.5 billion, down from €39.4 billion previously. While goods and services showed surpluses, secondary and primary income recorded deficits.

Germany, a key player, hinted at economic growth in Q1, thanks to unexpected boosts from industry and construction. However, concerns linger over weak demand, both at home and abroad, alongside restrained investment and household spending.

The Euro/USD pair rebounded, gaining 0.5% on Wednesday, but remained just below 1.0700 on Thursday. ECB President Christine Lagarde’s remarks on inflation and sluggish European growth added to the positive sentiment.

Yet, there’s uncertainty within the ECB regarding interest rate adjustments, contrasting Lagarde’s caution with market expectations of rate cuts in June. Maintained higher rates could benefit the Euro, attracting more foreign investment.

Despite the cautious optimism, Rabobank FX Strategists warn of Eurozone’s slow growth and fiscal pressures, suggesting a potential decline to 1.0500 for EUR/USD, with prevailing uncertainties tipping the scales against the Euro.