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OECD downgrades Eurozone growth forecast

The Eurozone economy is in the spotlight as the OECD cuts its forecasts for some of the key countries in the bloc.

Europe still grows, gets boost from unlikely sources

The Organisation for Economic Co-operation and Development (OECD) yesterday, 6 March cut its global growth forecast for the second time in less than four months, citing US-Chinese trade tensions and Brexit as reasons for concern.

The OECD dropped its 2019 growth projections for the UK to 0.8 per cent compared to 1.8 per cent forecast this time last year. However, Britain still fared better than Germany. Europe’s largest economy, which heavily relies on exports, was downgraded from the initial forecast of 1.6 per cent to 0.7 per cent.

Today, the Eurozone will remain in the limelight, with Gross Domestic Product (GDP) data due for release at 10:00 (GMT). Later on, the European Central Bank (ECB) will announce its latest interest rate decision at 12:45, followed by a press conference with ECB President Mario Draghi.

The Eurozone appears to be catching the economic cold spread by China and the US caused by trade tensions, and todays’ expected drop in GDP to 1.2 per cent could just be the tip of the iceberg and could weigh on the single currency.

Italy has fallen into recession for the third time in a decade, with no signs of recovery in sight. France is close to contraction, and the diesel emissions scandal caused the German car industry to slow dramatically. If the data miss expectations, it could cause volatility.

The ECB is unlikely to raise the interest rate today. However, market participants will listen for clues in Draghi’s press conference and what action the ECB will take in the coming months as deflationary pressure is building.

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