By Abdulselam Durdak
Frankfurt letter, March 27

-Recovery in Eurozone ongoing

Last week in the Eurozone, investors followed reports of the European Central Bank (ECB) and an Institute of International Finance (IIF) economic outlook report.

While the IIF stated amid positive developments, that political risks remained in the Eurozone, the ECB's report noted that the recovery in the region strengthened, however, it said that Eurozone banks are still not profitable enough.

In the February monthly "monthly economic bulletin" published by the ECB, it was noted that the ECB's monetary policy measures maintained the favorable financing conditions necessary to ensure that inflation rates continue to converge to near 2 percent in the medium term.

"Incoming data, notably survey results, have increased the Governing Council’s confidence that the ongoing economic expansion will continue to firm and broaden," the report said, adding that the economic recovery in the Eurozone has strengthened steadily.

On the other hand, with its annual report on supervisory activities, the ECB warn that Eurozone banks need to boost their profitability and business models amid the risks that the sector faces.

According to an IIF report, there are positive fundamentals in the euro area, but political risks remain.

The report says the euro area continued its robust recovery in 2016, with GDP growth of 1.7 percent, outpacing the U.S.

"The ECB will remain cautious as it navigates the obstacles that lay ahead, with political events in the euro area a particular risk," the report said, adding that the IIF continue to expect tapering to be announced towards the end of this year, absent of adverse outcomes.


-The week ahead

This week, the ECB Governing Council Members will speak in different European cities. Members may give clues about the ECB's monetary policy steps in these speeches.

27 Mar,2017