Eurozone market update: Investors pay increased attention to fiscal sustainability
The European Union appears to be the latest target of Trump's tariff threats, but markets have been conditioned to expect lots of noise and little follow through from the US president. The common currency largely ignored both the threat and the backdown, and seems to have found a firm, albeit gradual upward trend.
The fiscal picture in the Eurozone is nowhere as dire as in the US, with average deficits stable at levels of less than half of those across the Atlantic, in spite of the German fiscal plan.
This relative sanity may be helping to support the common currency as investors pay increased attention to fiscal sustainability. On the negative side, good news on inflation has probably cleared the way for at least two further ECB rate cuts by the end of the year.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
