European Economics

Economy shrugging off euro’s rise

European Chart Book
Written by Capital Economics Economist

At the start of January, the euro reached a three-year high against the US dollar and a three-and-a-half year high in trade-weighted terms. While the euro’s climb over the past year or so may seem like a major headwind to economic growth, we remain optimistic about the outlook for the euro-zone. For a start, the euro does not look anywhere near overvalued in a historical context. What’s more, the single currency’s rise mainly reflects the strength of the region’s economy. And against a backdrop of strong global growth, business surveys continue to reveal robust export orders.