The European Central Bank appears set for a significant policy shift with an anticipated rate cut that would bring its deposit rate down to 2.75%, the lowest level since early 2023.
This decision comes as the eurozone navigates a complex economic landscape, marked by continuing disinflation and concerns about economic vitality. Despite these challenges, European stocks have outperformed their U.S. counterparts, with the Vanguard FTSE Europe ETF gaining 6% compared to the S&P 500’s 3% increase.
The economic picture shows stark contrasts across the region, with traditional powerhouses Germany and France facing stagnation while peripheral economies like Spain and Greece benefit from robust tourism.
Markets will closely watch ECB President Christine Lagarde’s press conference for hints about future rate decisions and her assessment of potential impacts from Trump’s proposed trade policies, particularly as the euro has already weakened 7% since late September.