Latest news with #euroZone
Reuters
07-07-2025
- Business
- Reuters
Euro zone investor morale hits three-year record as recovery broadens
BERLIN, July 7 (Reuters) - Investor sentiment in the euro zone improved more than expected in July to hit its highest level in more than three years, a survey showed on Monday, as the bloc's economic recovery broadened. The Sentix index for the euro zone rose to 4.5 from 0.2 in June, beating the 1.1 forecast from analysts polled by Reuters and marking its third consecutive monthly increase. The current situation sub-index improved notably but remained in negative territory, rising by 5.8 points to -7.3, while expectations climbed 2.8 points to 17.0, also marking a third straight rise. The survey of investors, conducted between July 4-6, showed the recovery was broad-based across regions, with the United States economy making particularly strong gains after lagging in previous months. Germany, Europe's largest economy, also showed continued improvement with its overall index reaching -0.4, its highest since February 2022, as the current situation rose for a fifth straight month. The survey indicated the European Central Bank's room for further interest rate cuts may narrow as the economic upturn strengthens, though inflation pressures remain contained for now.
Zawya
05-06-2025
- Business
- Zawya
ECB cuts rates as bets build on a summer pause
The European Central Bank cut interest rates as expected on Thursday and kept all options on the table for its next meetings even as the case grows for a summer pause in its year-long easing cycle. The ECB has now lowered borrowing costs eight times, or by 2 percentage points since last June, seeking to prop up a euro zone economy that was struggling even before erratic U.S. economic and trade policies dealt it further blows. With inflation now safely in line with its 2% target and the cut well-flagged, the focus has shifted to the ECB's message about the path ahead, especially since at 2%, rates are now in the "neutral" range where they neither stimulate nor slow growth. The central bank for the 20 countries that share the euro offered few hints in its statement, however, sticking to its mantra that decisions would be taken meeting-by-meeting and based on incoming data. "The Governing Council is not pre-committing to a particular rate path," the ECB said. "Interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission." ECB President Christine Lagarde's 1245 GMT news conference may offer more clues about the months ahead, with the bank's most aggressive easing cycle since the 2008/2009 Global Financial Crisis expected to start winding down. Investors are already pricing in a pause in July, and some conservative policymakers have advocated a break to give the ECB a chance to reassess how exceptional uncertainty and policy upheaval both at home and abroad will shift the outlook. While ECB board member and chief hawk Isabel Schnabel has made explicit calls for a pause, others have been more cautious and Lagarde is likely to stick to language that leaves the ECB's options open, as the outlook is prone to sudden changes. The case for a pause rests on the premise that the short- and medium-term prospects for the currency bloc differ greatly and may require different policy responses. Inflation could dip in the short term - possibly even below the ECB's target - but increased government spending and higher trade barriers may add to price pressures later. The added complication is that monetary policy impacts the economy with a 12-to-18 month lag, so support approved now could be giving help to a bloc that no longer needs it. Investors still see at least one more rate cut later this year, however, and a small chance of another move later on, especially if U.S. President Donald Trump's trade war intensifies. DIVERGENT OUTLOOK Acknowledging near-term weakness, the ECB cut its inflation projection for next year. Trump's tariffs are already damaging activity and will have a lasting impact even if an amicable resolution is found, given the hit to confidence and investment. "A further escalation of trade tensions over the coming months would result in growth and inflation being below the baseline projections," the ECB said. "By contrast, if trade tensions were resolved with a benign outcome, growth and, to a lesser extent, inflation would be higher than in the baseline projections." This sluggish growth, along with lower energy costs and a strong euro, will curb price pressures. Indeed, most economists think inflation could fall below the ECB's 2% target next year, triggering memories of the pre-pandemic decade when price growth persistently undershot 2%, even if projections show it back at target in 2027. Further ahead, the outlook changes significantly. The European Union is likely to retaliate against any permanent U.S. tariffs, raising the cost of international trade. Firms could meanwhile relocate some activity to avoid trade barriers but changes to corporate value chains are also likely to raise costs. Higher European defence spending, particularly by Germany, and the cost of the green transition could add to inflation while a shrinking workforce due to an ageing population will keep wage pressures elevated. (Editing by Catherine Evans and Lincoln Feast)
BreakingNews.ie
05-06-2025
- Business
- BreakingNews.ie
ECB cuts interest rates as EU likely to counter US tariffs
The European Central Bank cut interest rates as expected on Thursday and kept all options on the table for its next meetings even as the case grows for a summer pause in its year-long easing cycle. The ECB has now lowered borrowing costs eight times, or by 2 percentage points since last June, seeking to prop up a euro zone economy that was struggling even before erratic US economic and trade policies dealt it further blows. Advertisement With inflation now safely in line with its 2 per cent target and the cut well-flagged, the focus has shifted to the ECB's message about the path ahead, especially since at 2 per cent, rates are now in the "neutral" range where they neither stimulate nor slow growth. The central bank for the 20 countries that share the euro offered few hints in its statement, however, sticking to its mantra that decisions would be taken meeting-by-meeting and based on incoming data. "The Governing Council is not pre-committing to a particular rate path," the ECB said. "Interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission." ECB President Christine Lagarde's 1245 GMT news conference may offer more clues about the months ahead, with the bank's most aggressive easing cycle since the 2008/2009 Global Financial Crisis expected to start winding down. Advertisement Investors are already pricing in a pause in July, and some conservative policymakers have advocated a break to give the ECB a chance to reassess how exceptional uncertainty and policy upheaval both at home and abroad will shift the outlook. While ECB board member and chief hawk Isabel Schnabel has made explicit calls for a pause, others have been more cautious and Lagarde is likely to stick to language that leaves the ECB's options open, as the outlook is prone to sudden changes. The case for a pause rests on the premise that the short- and medium-term prospects for the currency bloc differ greatly and may require different policy responses. Inflation could dip in the short term - possibly even below the ECB's target - but increased government spending and higher trade barriers may add to price pressures later. Advertisement The added complication is that monetary policy impacts the economy with a 12-to-18 month lag, so support approved now could be giving help to a bloc that no longer needs it. Investors still see at least one more rate cut later this year, however, and a small chance of another move later on, especially if US. President Donald Trump's trade war intensifies Acknowledging near-term weakness, the ECB cut its inflation projection for next year. Trump's tariffs are already damaging activity and will have a lasting impact even if an amicable resolution is found, given the hit to confidence and investment. Advertisement "A further escalation of trade tensions over the coming months would result in growth and inflation being below the baseline projections," the ECB said. "By contrast, if trade tensions were resolved with a benign outcome, growth and, to a lesser extent, inflation would be higher than in the baseline projections." This sluggish growth, along with lower energy costs and a strong euro, will curb price pressures. Indeed, most economists think inflation could fall below the ECB's 2 per cent target next year, triggering memories of the pre-pandemic decade when price growth persistently undershot 2 per cent, even if projections show it back at target in 2027. Further ahead, the outlook changes significantly. The European Union is likely to retaliate against any permanent US tariffs, raising the cost of international trade. Firms could meanwhile relocate some activity to avoid trade barriers but changes to corporate value chains are also likely to raise costs. Higher European defence spending, particularly by Germany, and the cost of the green transition could add to inflation while a shrinking workforce due to an ageing population will keep wage pressures elevated.
Zawya
23-05-2025
- Business
- Zawya
European stocks tumble, bonds rally after Trump recommends 50% tariff on EU
European stocks tumbled, the euro gave back some gains, and euro zone government bond yields fell sharply on Friday after U.S. President Donald Trump said he is recommending a straight 50% tariff on goods from the European Union starting on June 1. Trump's remarks in a social media post, brought a sudden halt to investors expectations that the bulk of tariffs Trump announced in early April would be negotiated away, a view which had supported stocks market gains in recent weeks. Europe's broad Stoxx 600 index was last down 2%, with auto and banking stocks both falling well over 3%. U.S. S&P 500 futures also fell around 1.5%, as investors also worried that the tariffs would hurt U.S. and global growth. "This is a major escalation of trade tensions," said Holger Schmieding, chief economist, at Berenberg. "With Trump you never know but this would be a major escalation. The EU would have to react and it is something that would really hurt the U.S. and European economy." Investor expectations that tariffs would hurt economic growth in the currency bloc caused them to up bets on the scale of European Central Bank easing this year, and sent them scurrying to government bonds. Germany's rate-sensitive two year bond yield was last down 10 basis points at 1.73%, while benchmark 10 year yields were down 9 bps at 2.55%. In currency markets the biggest gainer was the safe haven Japanese yen. The dollar was last down 0.9% on the yen at 142.77, while the euro was down 0.56% at 161.43 yen. The euro was more muted versus the dollar - in recent weeks investors have sold the U.S. currency when worried about tariffs - and so traders had to balance that with concern about the euro zone growth outlook. The euro gave back some of its earlier gains against he dollar on the tariff news, but remained 0.3% higher on the day at $1.1311. (Reporting by Alun John, editing by Dhara Ranasinghe)
Bloomberg
20-05-2025
- Business
- Bloomberg
ECB's Wunsch Says Economy May Need Some Support From Rates
European Central Bank Governing Council member Pierre Wunsch said the euro-zone economy may need interest rates at 'mildly supportive' levels to ensure inflation doesn't fall below target after a series of shocks. With US tariffs denting confidence, strengthening the euro and sending energy costs lower, price pressures will probably turn out weaker than previously anticipated, the Belgian central-bank chief said Tuesday in an interview. Market bets for a deposit rate of just below 2% at year-end are therefore 'reasonable,' he said.
