Is EURO bull run gonna end?
ECB vs Fed Policy Paths
Federal Reserve officials are divided but generally more cautious about cutting rates soon. In mid-June the Fed held rates steady at 4.25–4.50% and forecast only two 25bp cuts in 2025
Chair Powell warned of “meaningful” inflation coming from U.S. tariffs
implying cuts may be delayed. Indeed, Fed Governor Bowman recently said she would support a rate cut “as soon as” the July meeting if inflation remains contained
highlighting internal debate. In contrast, the ECB has already started lowering rates. After its June 5 decision to cut 25bp to 2.0%, Goldman Sachs analysts see two more ECB cuts (bringing deposit rates toward ~1.5% by year-end)
As one strategist noted, “market pricing now shows a big gap between ECB and Fed rate cut expectations…Fed remains hamstrung by inflation,” keeping U.S. yields relatively high
a stickier Fed (fewer cuts) versus a more dovish ECB (more cuts) would favor USD strength and EUR weakness.
Geopolitical and Eurozone Risks
Europe’s two largest economies face looming elections and weak coalitions. Fitch Solutions notes “Germany is set to hold early elections in February 2025” complicated by far-right gains, while France “is currently being governed by a weak coalition” with rising debt risks
Such instability can undermine confidence in the euro.
Slow growth: Eurozone growth is sluggish. After a 0.2% contraction in Germany, Fitch warns that “Germany and Italy [are] weighing on aggregate growth forecasts” in 2025
Anemic output makes the euro vulnerable, especially if the U.S. economy outperforms.
Labor market tightening: Euro-area unemployment is low (~6.3%), but conditions are “unjustifiably tight” given the weak economy
Any economic slowdown could quickly raise Eurozone joblessness, pressuring the euro.
Trade/tariff risks: A return to U.S. protectionism (e.g. renewed tariffs) could hit European exporters. Trump presidency could strain EU–US relations and dent demand for Eurozone exports
Even talk of fresh tariffs tends to boost the safe-haven dollar over the euro.
ECB vs Fed Policy Paths
Federal Reserve officials are divided but generally more cautious about cutting rates soon. In mid-June the Fed held rates steady at 4.25–4.50% and forecast only two 25bp cuts in 2025
Chair Powell warned of “meaningful” inflation coming from U.S. tariffs
implying cuts may be delayed. Indeed, Fed Governor Bowman recently said she would support a rate cut “as soon as” the July meeting if inflation remains contained
highlighting internal debate. In contrast, the ECB has already started lowering rates. After its June 5 decision to cut 25bp to 2.0%, Goldman Sachs analysts see two more ECB cuts (bringing deposit rates toward ~1.5% by year-end)
As one strategist noted, “market pricing now shows a big gap between ECB and Fed rate cut expectations…Fed remains hamstrung by inflation,” keeping U.S. yields relatively high
a stickier Fed (fewer cuts) versus a more dovish ECB (more cuts) would favor USD strength and EUR weakness.
Geopolitical and Eurozone Risks
Europe’s two largest economies face looming elections and weak coalitions. Fitch Solutions notes “Germany is set to hold early elections in February 2025” complicated by far-right gains, while France “is currently being governed by a weak coalition” with rising debt risks
Such instability can undermine confidence in the euro.
Slow growth: Eurozone growth is sluggish. After a 0.2% contraction in Germany, Fitch warns that “Germany and Italy [are] weighing on aggregate growth forecasts” in 2025
Anemic output makes the euro vulnerable, especially if the U.S. economy outperforms.
Labor market tightening: Euro-area unemployment is low (~6.3%), but conditions are “unjustifiably tight” given the weak economy
Any economic slowdown could quickly raise Eurozone joblessness, pressuring the euro.
Trade/tariff risks: A return to U.S. protectionism (e.g. renewed tariffs) could hit European exporters. Trump presidency could strain EU–US relations and dent demand for Eurozone exports
Even talk of fresh tariffs tends to boost the safe-haven dollar over the euro.
Trade active
We were expecting this kind of Rejection from the top.. Good luck shorter's.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.