Markets overestimating economic fallout from US tariffs in Eurozone
Eurozone economic reports are the slowest to be compiled of all the major economic areas, so we still have not seen any hard data reflecting the impact of "Liberation Day" - only sentiment surveys.
These confidence indices have shown relative resilience, and the massive German fiscal expansion package, which is expected to offer some much needed relief for the battered common bloc economy, provides another reason for optimism.
Market expectations for another three cuts out from the European Central Bank this year, and a low terminal rate of just 1.5%, are pricing in a lot of economic fallout from US tariffs that may not take place, especially given the more positive tone towards agreements that we’ve seen these last few days.
This week there are few market moving events out of the Eurozone, so expect the euro to trade off of developments elsewhere.”
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.
