With the economy in the Eurozone on the brink of a deflationary spiral, the U.S. Treasury Department issued a warning to investors saying that even the European Central Bank’s recent measures to stimulate the region’s economy may be insufficient to stave off deflation. The U.S. government is specifically suggesting that Germany step up its efforts to increase regional demand, otherwise the E.U. could slip into recession.
As reported at 8:54 a.m. (JST) in Tokyo, the EUR/USD pair was trading higher at 1.2820, a gain of 0.2% and only a few pips from the session high. The EUR/JPY pair was trading lower at 135.9160, a loss of 0.1%. The common currency Euro has steadily and broadly depreciated versus its peers in the wake of the ECB’s easing efforts.
E.U. Growth a Growing Concern
The Eurozone’s lack of growth has been of great concern to investors, especially given that there appears to be a slowdown in growth in China which is one of the E.U.’s major trading partners. The Treasury Department report said that Germany, as a “surplus” country, can help to drive regional demand and even assist in global rebalancing, echoing the sentiment of finance officials and economists who recently called on the Eurozone’s economic driver to spend and invest rather than focusing so keenly on austerity.