Summary:
The euro is near a two-year low, with weak eurozone growth, falling German confidence, and the ECB cautious on easing despite inflation stabilization.
The euro was not far away from a two-year low with few signs of improvement in the eurozone. In the latest ifo survey, Germany's business confidence has plunged to its lowest level since mid-2020 in December.
The bloc's economy will pick up less momentum next year than previously foreseen and expand at a pace of 1%, according to a Bloomberg survey. Analysts also lowered their forecast for 2026 to 1.2%.
They are more pessimistic than the ECB that lowered its outlook at its latest policy meeting. But policymakers expect households to drive a recovery as incomes rise and inflation stabilises.
President Christine Lagarde said the eurozone was getting "very close" to reaching the medium-term inflation goal, according to an FT report. It suggests that the central bank remains tilted towards easing.
She stressed that she opposed retaliation by Europe to tariff threats made by Trump in that "this tit-for-tat, conflictual way of dealing with trade is just bad for the global economy at large."
The West should stop suggesting peace talks to Ukrainian President Volodymyr Zelenskyy and instead ensure their promises of security guarantees to Kyiv are not"empty", the EU's chief diplomat warned last week.
A breakout to the downside gives us more reasons to stay bearish on the euro though it has found support around 1.0350. A break above the descending trendline is what it takes to reverse that bias.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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