The European Commission said in its quarterly report today that the euro is overvalued against other currencies and any further gains could damage the more open economies in the eurozone.

The report also revealed that the commission see's economic recovery as gaining momentum, but warns that setbacks should not be ruled out, particularly with rising unemployment. 'Estimates of the euro equilibrium exchange-rate point to a strong euro with an estimated overvaluation of the REER (CPI-deflated real effective exchange rate) of around 7 to 8%,' the report said.  'Further euro appreciation could be a serious concern for the more open euro-area economies'. The dollar has gained against the euro today, as recent signs of recovery in the US and worries over the health of the weaker euro economies continue to influence trading. 'Sentiment in the eurozone will suffer from the fiscal troubles of its weakest members,' Mansoor Mohi-uddin, the chief currency strategist at UBS, wrote in a note today. 'This hurts the euro, as it makes it less likely the ECB will be in a position to raise interest rates if one of its member countries faces the threat of defaulting on its debts in future.