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Jason Schenker

Euro Bulls Need to Show a Little Patience

There is less downside risk to the euro-zone economy than the U.S. economy.
ECB President Mario Draghi isn't ready to raise rates

ECB President Mario Draghi isn't ready to raise rates

Photographer: Andrew Harrer/Bloomberg

Nobody expects the European Central Bank to raise interest rates when policy makers meet Thursday. Even so, conditions are ripe for the euro to resume its upward trend after stalling for much of the past three months.

The naysayers like to point to purchasing manager index, or PMI, surveys showing a deceleration in manufacturing and the potential for growth to slow as the reason why the euro hasn’t been able to follow through on its big gains from last year. But the truth is, there is less downside risk to the euro zone economy than there is in the U.S. economy.  The euro zone has enjoyed low inflation of only 1.3 percent, despite showing relatively strong year-over-year GDP growth of 2.7 percent. And although PMI surveys have weakened in recent months, they are still at high levels following a massive 57-month-long expansion through March.