Production in the Eurozone – the 19 EU states that use the euro as their currency – jumped a significant 1.1% in February, the biggest gain since December 2022. Nondurable consumer goods are leading this increase. This is a good sign for strong first-quarter GDP growth across the region. Analysts warn that this growth is not occurring everywhere. A large share of this growth is driven by a narrow slice of the manufacturing sector.
Given the more promising recent trend in industrial output, that’s less relevant now, especially as July marks the second month of vigorous growth in a row. This level of production is just a hair above the miserable pace we saw in 2024. Perhaps most significantly, we should pay attention to this trend. Even these modest gains hardly suggest a strong recovery is on the way for the Eurozone economy overall.
Focusing back on the US Dollar’s strength, the Greenback took hold across the board on Tuesday. The EUR/USD currency pair dropped below the important support level at 1.1300, indicating the strength of the Dollar with respect to the Euro. The US Dollar is flying high. Such a turn in market dynamics welcomely accentuates the power of the American currency, overshadowing its European counterpart.
… industrial production increases … strengthening US Dollar … . These trends happen amid the continued state of geopolitical tensions, most notably the trade war between the United States and China. Even beyond current hostilities, this conflict will add to uncertainties in global trade, raising barriers and risks for both countries’ economies. American tariffs on Eurozone products have just been lowered temporarily to 10%. While this change provides valuable relief, it highlights just how tenuous transatlantic trade relations remain.
Although greeted as possible further good news by the industrial production numbers of February, prognosticators are cautiously optimistic. Yet the fragile nature of this growth implies that deeper economic woes persist. The Eurozone will have to deal not just with production issues stemming from within the zone, but external pressures from continued trade disputes.
Now, what analysts are looking at is what’s ahead. They will be watching closely Eurozone industrial performance and developments in currency markets. Just how these factors’ interplay will be key in forming the economic outlook for both areas.