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The euro area currently comprises 19 European Union countries, with a total population of around 340m. When the euro was introduced in 1999, there were 11 member countries, with a joint population of 292m.

  • Forecasts

    Activity will slow but limited spare capacity and trade barriers will lift inflation, bringing rate rises back into view, leading to a major repricing of bonds. EUR falls will be limited by higher future rate differentials. download »
  • FX Notes

    We are happy to fund our long positions in EUR, as interest rate differentials may hold it back for a while, the external surplus may shrink, relative inflation may rise and political risks could materialise. download »
  • Focus Notes

    Through QE, central banks have expanded their government debt holdings. Were purchases maintained in Japan and in the euro area, debt sustainability would improve sharply in less than a decade. download »
  • Economics

    • GDP has expanded at a steady rate; the unemployment rate is below average and only slightly above its recent trough. Inflation is below target. The external surplus is sizeable and the fiscal deficit is small. download »
  • Markets

    • EUR is below its real mean. Futures price in a small chance of one 25bp rate hike over the coming two years. Bund yields are still close to lows, the curve is flat and spreads are below their mean. Equity returns have been mid-tier. download »
  • Investing

    • In time, rising inflation may force a switch to tightening monetary policy. Yields look far too low to be consistent with the economic backdrop. Until interest rate differentials rise, funding using EUR looks attractive. download »