Outlook for Eurozone 'more rosy' than expected
|Thursday’s ECB meeting came and went without so much as a blip - just what Lagarde and co. would have been hoping for. Monetary policy remains in a “good place”.
Downside risks to growth have eased, particularly following the signing of the US-EU trade deal and the abating of the risks associated with the US-China trade war. Euro Area inflation is also consistent with the 2% target, despite the disinflationary implications of a strong euro and easing wage pressures.
We see nothing in Lagarde’s press conference that would suggest to us that further cuts are on the way, and the bar for further action remains extraordinarily high. This, we think, should act to keep the euro well supported throughout 2026.
In other news, the preliminary third quarter GDP figures out of the Euro Area provided a welcome upside surprise, with the economy expanding by a larger than anticipated 0.2% (vs. the +0.1% consensus).
So for, the outlook in the bloc appears relatively more rosy than feared.
This could change, of course, should fiscal stimulus in Germany fail to provide the desired boost to growth, and/or the tariffs weigh more heavily on the economy than expected. For now, however, the news is encouraging, and that may provide some tailwinds for the common currency in the near-term.
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