"On the European side, the recurring theme of modest yet fragile growth remains: Eurozone GDP for Q3 2025 expanded by only +0.2% q/q (EU: +0.3% q/q), while the October HICP flash eased to 2.1% y/y - close to the ECB's target but still insufficient to reignite new growth momentum. In terms of policy, the ECB continues to anchor rates at relatively low levels, signalling caution to maintain inflation around 2% while accepting the current pattern of mild growth."
"Fed Chair Jerome Powell emphasized that the recent reduction was "not a signal of a broad easing cycle to come." Economic data such as the ISM Manufacturing Index, which fell to 48.7 in October (from 49.1 in September), indicate that the manufacturing sector remains in contraction. However, the U.S. dollar has strengthened on expectations of a prolonged restrictive policy and a reduced likelihood of early rate cuts."
"From a capital-flow perspective, tariff concerns and trade uncertainty - particularly between the U.S. and China - still linger. Although recent high-level meetings suggest a temporary easing of tensions, it is premature to conclude that tariff-related risks have been fully removed. This uncertainty continues to weigh on supply-chain stability and input costs for European firms, thereby limiting the euro's ability to recover during short-term "risk-on" phases."
Eurozone growth remains modest and fragile, with Q3 2025 GDP up only +0.2% q/q (EU +0.3% q/q) and October HICP easing to 2.1% y/y. The ECB keeps policy rates relatively low to anchor inflation near 2% while tolerating mild growth. The United States follows a higher-for-longer stance after a late-October rate cut, with Powell saying the reduction was not a signal of a broad easing cycle. ISM manufacturing at 48.7 signals contraction, while the DXY rose near 99.7 and 10-year yields around 4.0-4.1% support USD via carry trades. Persisting U.S.-China tariff uncertainty weighs on supply chains and European input costs, limiting euro recoveries during risk-on phases.
#eurusd #interest-rate-differential #eurozone-growth #us-monetary-policy #us-china-trade-uncertainty
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