Modest EUR upside expected thanks to dovish Fed communication

Matthew Ryan, CFA Ebury

Eurozone economic data for the first half of the year has been distorted by US tariffs.

Exports surged in the first quarter of 2025 as American businesses front-loaded imports ahead of the implementation of the tariffs, before falling thereafter.

Now that the new trade regime is stabilising, we expect data to be more informative. Sentiment data points to a modest improvement, as the August PMIs beat expectations. Modest growth and inflation near target probably means stable monetary policy.

Now that the Fed appears to be turning dovish, the shrinkage in the interest differentials across the Atlantic should be supportive of further modest euro upside.

Economic news out of the common bloc is limited this week, but investors will be keeping an eye on Thursday’s latest ECB meeting accounts.

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.

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