The Euro has regained some stability, climbing to $1.05, after hitting two-year lows earlier this month. Despite this modest recovery, investor sentiment remains cautious due to Europe’s ongoing economic challenges and rising apprehensions about the potential trade policies under a second Donald Trump administration.
Trump’s Tariff Threats Heighten Economic Concerns
Donald Trump has renewed his aggressive trade rhetoric, proposing:
- 10% tariff increases on China
- 25% tariffs on Mexico and Canada
Europe is not spared, with Trump warning of substantial tariffs on European goods, particularly targeting the struggling automotive sector. He emphasized that the EU would “pay a big price.” These threats could further pressure Europe’s already fragile manufacturing industry, exacerbating the economic downturn.
ECB Rate Cuts Anticipated Amid Bleak Economic Outlook
The gloomy economic landscape has intensified market expectations for aggressive monetary easing by the European Central Bank (ECB).
- A 25 basis point rate cut next month is fully priced in.
- The likelihood of a 50 basis point cut has surged to 58%, reflecting the growing urgency to support the faltering economy.
Upcoming Inflation Data in Focus
Investors are now awaiting the release of preliminary Euro Area inflation data this week, which could offer critical insights into the ECB’s next move. Should inflation data signal persistent economic weakness, it may strengthen the case for a larger rate cut.
