Downbeat Eurozone projections boost Euro
|The last European Central Bank meeting of the year delivered on what most of the market had expected: a 25 basis point cut, and a sombre downgrade of its expectations for Eurozone growth in 2025 and 2026, which Lagarde hinted could be negatively impacted by Trump’s tariffs.
The HICP projections were left largely unchanged, although the bank did downwardly revise its view for core inflation.
The downbeat assessment probably means that there will be additional cuts at every meeting in the first half of 2025.
The euro took this in stride, in large part as markets were already pricing in a very dovish message prior to the meeting, and the common currency managed to end the week just above the 1.05 level against the dollar.
The next big test will be the December flash PMIs of business activity, which took a dive in November after Trump's electoral victory. A rebound here is not out of the question now that the initial shock has worn out.
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