The euro has stabilized on Friday. In the European session, EUR/USD is currently trading at 1.0296, up 0.3% on the day. The euro fell as much as 1.2% a day earlier and fell below the 1.03 line for the first time since Nov. 2022.

The new euro locomotive is …. Spain?

The eurozone economy wasn’t exactly on fire in 2024. The Ukraine-Russia war led to increases in gas and oil prices, millions of war refugees have strained the economy and many eurozone countries have boosted their defense budget as relations with Moscow have chilled. In addition, global demand has been weak and the incoming Trump administration could spell tariffs and even a trade war.

Germany, which for decades was the locomotive of Europe, hasn’t recovered since the corona pandemic. Competition from China has hurt the key automotive industry and the government coalition has collapsed, resulting in political instability. France and Italy, the second and third largest economies in the eurozone, are also struggling.

The bright light is this gloomy picture has been Spain, the fourth-largest economy in the eurozone. “Sunny Spain” isn’t just a catchy phrase for winter-weary tourists, but also reflects a resilient economy. According to the European Commission, Spain’s economy is expected to have expanded by an impressive 3% in 2024. In contrast, Germany’s GDP is projected to have contrasted by -0.1%.

Spain’s manufacturing and services sectors are expanding, in contrast to the eurozone’s three largest economies which are showing contraction. The labor market remains solid and the number of unemployed fell by 25.3 thousand in December, the lowest figure since December 2007.

The European Central Bank entered an easing phase in June and has lowered rates at the past three straight meetings. The central bank is keeping an eye on inflation but is expected to continue lowering rates in order to boost the weak economy. The ECB meets next on January 30.

EUR/USD Technical

• EUR/USD is testing resistance at 1.0289. Above, there is resistance at 1.0353
• There is support at 1.0203 and 1.0139

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