Economy shrugs off stronger euro for now

Although the euro’s strength does not appear to have had an adverse impact on the euro-zone economy so far, this may not last. After all, unless the currency’s recent appreciation is reversed, it seems unlikely that euro-zone export growth will maintain its recent strong pace. But some of the effect on exports will be offset by rising global demand. And in any case, the outlook for domestic demand is strong. As such, the euro’s appreciation is not enough to warrant a revision to our growth forecasts. Nor do we expect it to dissuade the ECB from tapering its asset purchases, although a further rise might prompt the Bank to strengthen its forward guidance on interest rates.