A glimmer of (European) hope
The ECB has made significant progress in cutting rates towards an accommodative level. The Eurozone saw evidence of cooling inflation much sooner than many economies and has been able to respond accordingly, cutting the deposit rate to 2%. The ECB will meet again this Thursday to publish its latest monetary policy decision. Thanks to recent data, there is a small glimmer of hope of an improving growth outlook in Europe. That has been led mostly by Germany which has seen improving sentiment-based data, as evidenced by the recent IFO survey.
One reason why markets may start to find optimism in the outlook for Eurozone growth is because of just how depressed that outlook has looked over the past 12 months. Despite an initial increase in growth expectations following the announcement of refreshed fiscal plans for Germany in March, expectations have stagnated since then. Despite some regional progress, the political situation in France is of course creating disturbances to the region’s overall attractiveness to investors.
As a result of the substantial progress made by the ECB in cutting rates beyond neutral territory, the central bank is not expected to make any adjustments to its key interest rates this week. Whilst the Pound remains focussed on the fast-approaching November budget, EURGBP has been able to make progress higher. Sticky inflation had kept the Pound bid amidst expectations the Bank of England would have to keep rates within restrictive territory. With UK inflation undershooting at the last print, Euro-sellers may be in store to obtain further value.
Discussion and Analysis by Charles Porter
Related Insights
Daily Brief – Inflation’s peak?
Charles Porter
Thu 23 Oct 2025
Inflation’s peak? Yesterday’s publication of the latest UK inflation report will be welcomed by households and the government alike. The report released prior to the market open yesterday showed UK inflation to September remained stable month-on-month. That might not sound like a whole lot at face value, but it is in fact critical that headline […]
Daily Brief – Calling time on Swissy
Charles Porter
Tue 14 Oct 2025
Calling time on Swissy Switzerland’s Franc may be destined to faulter under its own weight. Despite rock bottom interest rates, the Swiss Franc has been a significant beneficiary of the post-Covid and Trump2 world. EURCHF, a key barometer of European risk, shows some 20-cents worth of Swiss rally post-Covid. The pair has dropped from well […]
Daily Brief – A testing week
Charles Porter
Tue 21 Oct 2025
A testing week Markets so far have largely endured the admonitions coming from significant figures within the world of finance. The Bank of England’s own Andrew Bailey’s warnings of the risks of a market crash were uncommon for an MPC chair and initially took markets aback. Shortly thereafter, prominent figures warned of a pre-Halloween fright […]
