Eurozone: Firmer growth and eventual ECB hikes – BNP Paribas

FXStreet Insights Team FXStreet

BNP Paribas projects Eurozone growth at 1.6% in 2026, supported by German fiscal measures, higher military and AI-related investment, and a resilient labour market. Inflation is expected to stay below 2% in 2026 before gradually accelerating in 2027. This would prompt the ECB to raise the deposit facility rate to 2.5% in the second half of 2027.

Growth support sets stage for ECB

"After holding up well in 2025 (1.5%), growth is expected to strengthen in 2026 (+1.6%)."

"The roll-out of fiscal measures in Germany and the planned increase in military spending and AI-related investment in Europe, against a backdrop of labour market resilience, underpin this scenario."

"Inflation is expected to remain below the 2% target in 2026."

"Stronger economic activity will lead to a progressive acceleration in inflation in 2027, albeit a moderate one."

"This would lead the ECB to increase the policy rate in H2 2027, bringing the deposit facility rate to 2.5%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD remains offered below 0.7000

AUD/USD extends its decline for a second consecutive session, retreating toward the 0.6960 region, or multi-day lows, ahead of the opening bell in Asia. The pair’s decline comes as investors keep digesting the RBA’s latest monetary policy decision and gear up for US Midterm election results.

USD/JPY fails near 159.00 amid weak USD, intervention risks

USD/JPY edges lower during Tuesday’s Asian session, reversing part of the previous day's gains to 158.00 as the US Dollar remains depressed amid hopes for Iran diplomacy and ahead of US midterm elections. Meanwhile, intervention risks support the Japanese Yen, though the uncertainty over the timing of the next BoJ rate hike caps gains. This keeps the pair confined within a familiar range and warrants caution before placing directional bets.

Gold struggles near $3,900 as traders assess Middle East developments,US election risks

Gold (XAU/USD) loses momentum on Tuesday as Oil prices rebound after the Wall Street Journal (WSJ) reported a US strike on Iran’s Qeshm Island. At the time of writing, XAU/USD trades around $3,909, down 0.93% on the day.

BNB Price Forecast: BNB rebounds above $700 as Binance records net inflows after hack

BNB (BNB) springs up above $700 on Tuesday, as bulls push to regain momentum following last week’s sell-off. The decline from highs above $760 on Thursday to lows of $680 was largely driven by investor reaction to the security breach on Binance, the largest crypto exchange. The hack impacted approximately $6.3 billion, the largest in crypto industry history.

US Dollar Index edges up within range with midterm elections front and centre

The US Dollar Index is picking up from session lows but remains within previous ranges, below 102.00. The Greenback is drawing support from hostilities in Iran and higher Oil prices, but US political uncertainty is capping gains.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.