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August 4, 2025 8:25 AM UTC
HICP, inflation – still at target – is very much a side issue for the ECB at present, albeit with the likes of oil prices and tariff retaliation and a low but far from authoritative jobless rate (Figure 3) possibly accentuating existing and looming Council divides. Regardless, despite adverse
July 30, 2025 9:52 AM UTC
As we highlighted in our preview, for an economy that has seen repeated upside surprises and above trend growth, now some 1.4% in the year to Q2, GDP data do not seem to have had much impact is shaping, let alone dominating, ECB policy thinking. We think this will continue to be the case even after
July 29, 2025 9:26 AM UTC
The ECB contends that the EZ economy has shown resilience of late. Maybe so, albeit where GDP data (likely to average a satisfactory 0.3% q/q performance so far this year) are probably offering a misleading picture of underlying trends in real activity. Indeed, recent GDP data gains have been pr
July 28, 2025 9:08 AM UTC
In what seems to have been a fully-fledged political capitulation to the U.S. the EU, it seems, is accepting an agreement that would see an almost-blanket reciprocal 15% tariff on its exports to the U.S. But there still some imponderables, not least the range of sectoral concessions, whether EU me
July 24, 2025 1:48 PM UTC
Given the uncertainty overhanging policy makers worldwide, let alone in the EZ, the ECB was always likely to revert to stable policy after seven consecutive cuts which have taken the discount rate to its current 2%. In a much shortened statement, but which was more willing to highlight disinflatio
July 23, 2025 10:35 AM UTC
HICP, inflation – now at target – is very much a side issue for the ECB at present, albeit with the likes of oil prices and tariff retaliation possibly accentuating Council divides. Despite adverse energy base effects, we see the flash July HICP staying at June’s 2.0% but up from May’s eig
July 22, 2025 10:05 AM UTC
· Heavy issuance due to the U.S. budget deficit, plus Fed rate cuts will help further yield curve steepening in H2 2025. In EZ and UK, ECB and BOE QT is large and amplifies the amount of debt that the rest of the market has to absorb, which will also drives yield curve steepening al
July 22, 2025 9:13 AM UTC
For an economy that has seen repeated upside surprises and above trend growth of 1.5% in the year to Q1, GDP data do not seem to have had much impact is shaping, let alone dominating, ECB policy thinking. We think this will continue to be the case even where the looming Q2 data may show a modest con
July 21, 2025 10:07 AM UTC
· Money markets are putting too much weight on ECB communications and we feel that a softening labour market/financial conditions and more tariffs from the U.S. will be enough to shift the ECB to deliver two final 25bps cuts in H2 2025. Though the 2yr Germany to ECB depo rate spread w
July 16, 2025 1:07 PM UTC
The next ECB Council meeting decision on Jul 24 looms but (as we noted in the part one preview) markets (understandably) sees no further cut, at least at that juncture. However, we think that the ECB will ultimately still have to ease further - two more 25 bp cuts in H2 - and would not even rule o
July 15, 2025 8:45 AM UTC
The next ECB Council meeting decision on Jul 24 looms but where market (understandably) sees no further cut, at least at that juncture. Indeed, the ECB may signal signs of economic resilience albeit noting that the added uncertainty emanating from the latest U.S. tariff threat warrants more circum
July 14, 2025 6:56 AM UTC
Having announced over the weekend a 30% “reciprocal” tariff from August 1 on EU exports to the U.S., the EU seems to be a state of somewhat shock, wary that months of negotiations have failed, let alone succeeded in reducing the tariff threat from the original 20%. In response, European Commis
July 9, 2025 9:37 AM UTC
It remains unclear just how much of a movable feast the new U.S. tariff deadline of Aug 1 actually is. Trade deals with the US were supposed to be agreed by today, or face the reciprocal tariffs as outlined in April. But that has now been deferred to, with US Treasury Secretary Bessent, hinting ac
July 3, 2025 12:24 PM UTC
The account of the June 3-5 Council meeting just about left the door open for a move at the July 24 policy verdict given the array of news (probably negative particularly regarding tariffs but also bank lending) due beforehand. But the account adds to the impression we has initially that a pause
July 1, 2025 9:32 AM UTC
Despite its updated its monetary policy strategy detailed yesterday, inflation – now at target – is very much a side issue for the ECB at present, albeit with oil prices possibly accentuating Council divides. Admittedly, the flash June HICP rose a notch to 2.0% matching the -consensus, but up
June 24, 2025 8:57 AM UTC
Inflation – now below target – is very much a side issue for the ECB at present, albeit with oil prices possibly accentuating Council divides. Indeed, we see the flash June HICP staying at May’s below-consensus, eight-month low and below-target 1.9% (Figure 1). More notably, having jumped
June 20, 2025 9:24 AM UTC
· Amid what may still be tightening financial conditions and likely protracted trade uncertainty, we have pared back the EZ activity forecast for 2026. However, the picture this year appears to be slightly better but this is largely a distortion and we think that the economy has instead
June 10, 2025 2:25 PM UTC
Further ECB easing is on the cards, the question being whether this should start to encompass toning down quantitative tightening (QT) plans too! Notably, the two ppt fall in the discount rate cuts has come against a backdrop where the ECB has continued unconventional tightening by scaling back its
June 6, 2025 10:26 AM UTC
Given what now looks to have been an outstanding first quarter, the ECB’s assertion at this month’s Council press conference that it is a good position to navigate the uncertain conditions looks more tenable. After all, GDP jumped 0.6%, twice the previous estimate. But this is no indicator o
June 5, 2025 1:58 PM UTC
This widely seen 25 bp deposit rate cut (to 2.0%) now means the previous degree of tightening has been effectively halved. Notably, it comes alongside an ECB policy and economic outlook/bias little changed from that of recent months. The door is thus left open for a move at the July 24 policy ve
June 3, 2025 9:42 AM UTC
EZ HICP inflation met our below-consensus expectation in dropping to an eight-month low and below-target 1.9% (Figure 1) helped by rounding and a further m/m fall in fuel prices. More notably, having jumped 0.5 ppt to 4.0% in April, very probably due to the impact of the timing of Easter affecting
May 28, 2025 2:30 PM UTC
What is widely seen as an eighth 25 bp deposit rate cut in the current cycle on June 5 may be overshadowed by the ECB’s implicit if not explicit shift about the outlook thereafter. The door will be left open for a move at the July 24 policy verdict given the array of news (probably negative part
May 27, 2025 11:17 AM UTC
Exceeding expectations, EZ HICP inflation failed to fall in April, instead staying at 2.2%. More notably, services inflation jumped 0.5 ppt to 4.0%, very probably due to the impact of the timing of Easter affecting airfares and holiday costs. As already seen in flash French May numbers, and as was
May 27, 2025 9:22 AM UTC
At least within markets there is some relief that President Trump has deferred his ramped up 50% tariff threat from early June to July 9. Unambiguously positive is the fact that a better line of communication, if not rapport, now seems to exist between the U.S. president and EU Commission Presiden
May 23, 2025 1:35 PM UTC
After a protracted period of elevated EZ cost and price pressures, a reversal seems to be very much underway. Headline and underlying HICP inflation have moved back toward target, but to reinforce this downtrend there are an increasing array of softer cost pressure signals. ECB wage tracker and
May 22, 2025 12:46 PM UTC
The account of the April 16-17 ECB Council meeting suggested that the policy decision was more of a clearly agreed consensus, this papering over continued divides regarding the outlook; the risks from tariffs; and where inflation risks lie. The seventh and widely expected 25 bp deposit rate cut (w
May 22, 2025 9:00 AM UTC
The May flash composite PMI data may have fallen into apparent contraction territory as the index dropped to 49.5 in May from 50.4 in April, below the 50.0 no-change mark for the first time in five months and thereby signalling a reduction, albeit a marginal one. We do not take much issue whether
May 19, 2025 10:07 AM UTC
The European Commission (EC) Spring Forecast projects real EZ GDP growth in 2025 at 0.9%, some 0.4 ppt below its previous (autumn) view. There is also a downgrade to the 2026 growth picture by 0.2 ppt to 1.4%, projections that carry downside risks and where we think they are still too optimistic
May 14, 2025 9:05 AM UTC
The U.S. will likely introduce a 25% tariff on pharmaceuticals, which will increase pressure on the EU and other European countries (e.g. Switzerland) and also delay serious negotiations close to the 90 day reciprocal tariff deadline on July 9, adding to pressure on Europe by deliberately prolonging
May 7, 2025 9:34 AM UTC
With the EZ jobless rate nestling at record lows, it would support the ECB assessment that the EZ labor market is strong, the central bank seeing only a small rise in the jobless rate this year and on to be reversed from early next year onwards. However, that glosses over the fact that the labor m
May 2, 2025 9:46 AM UTC
EZ HICP inflation failed to fall back toward the 2% target in flash April data, instead staying at 2.2%. More notably, services inflation jumped 0.4 ppt, very probably due to the impact of the timing of Easter affecting airfares and holiday costs. As was the case when this Easter effect last happe
April 24, 2025 8:39 AM UTC
EZ HICP inflation is likely to fall back to the 2% target in flash April data, this six-month low would largely reflect a fall in fuel prices, but with services largely consolidating the clear fall seen last time around (Figure 1). All of which would mean a stable core reading of 2.4% but where th
April 23, 2025 9:18 AM UTC
Continuing a series of upside surprises, EZ GDP overshot both consensus and ECB expectations in Q4), albeit only after what was a cumulative 0.2 ppt upward revisions compared to the flash. We see a further rise in Q1 data (Figure 1), partly reflecting recent m/m increases in both manufacturing and s
April 17, 2025 1:48 PM UTC
A seventh and widely expected 25 bp deposit rate cut was overshadowed by the ECB’s communication shift about the outlook hereafter, no longer talking about how restrictive policy may be. This shift is entirely appropriate not least given the manner in which financial conditions are now tightenin
April 15, 2025 11:14 AM UTC
The ECB can draw comfort from signs that credit demand and supply for EZ households continues to improve. But the ECB’s latest bank lending survey (BLS) also offers worrying signs in regard to firms as well as questioning the alleged neutrality of the QT program. It shows a further (admittedly
April 9, 2025 8:03 AM UTC
It is surely not a question of whether the ECB cuts rates again at its Apr 17 decision, but what it communicates about policy thereafter. Not least given the manner in which financial conditions have tightened, the then-notable change in rhetoric last month to suggest the policy stance had become
April 3, 2025 2:22 PM UTC
The Account of the Governing Council meeting on 5-6 March 2025 seemingly dwelt more on the downside risks posted by trade uncertainties than the upside risks posed by fiscal expansion plans across much of the EU. It noted that not all members supported the proposal to lower the three key ECB inter
April 3, 2025 10:24 AM UTC
The U.S is imposing a widespread tariff on the EU of 20%, higher and broader than expected, this based on U.S. calculation of an effective tariff rate of in effect 39 per cent, a figure the EU puts at about 1 per cent. Moreover, rather than including factors such as VAT, and hygiene restrictions o
April 1, 2025 9:45 AM UTC
Largely as expected, there was more supportive news in the March flash HICP numbers (Figure 1), with the headline down a notch and core down 0.2 ppt (the former to 2.2% and hence the lowest since last autumn). Perhaps more notably services inflation slowed more clearly, dropping 0.3 ppt to 3.4%, a
March 25, 2025 1:43 PM UTC
February HICP inflation numbers did deliver better news and broadly and less marginally so after revisions with the headline dropping 0.2 ppt to an as-expected 2.3%. This ended a run of three successive rises and came about despite a rise in food inflation. Regardless, the core also eased 0.1 pp
March 24, 2025 10:45 AM UTC
· For once in a long while, we have upgraded the EZ activity forecast and for 2026 actually to a notch above consensus thinking. However, the current backdrop still suggests that while the economy has been growing afresh it is doing so timidly, with downside risks persisting more clearl
March 18, 2025 9:05 AM UTC
· The crucial date for more clarity is the June 24-26 NATO summit. Donald Trump might attend but will ask for more spending. NATO head Rutte’s desire is for above 3% of GDP for NATO countries, but the politics and budget suggest that a 2.5% minimum may only be agreed with Germany
March 14, 2025 12:08 PM UTC
It does seem as if effective German Chancellor-elect Merz now has enough parliamentary support to amend the so-called debt brake and unlock more spending and borrowing to be directed toward added defense and infrastructure. Thus, it does seem as if Germany and its economy are undergoing a sea-chan
March 6, 2025 3:01 PM UTC
Unsurprisingly, the ECB verdict was less important that the rhetoric. A sixth 25 bp discount rate was widely expected – and delivered - to 2.5%, but how wide the door is left open for further cuts may be more opaque. This both reflects gauging the extent of any lingering degree of policy restric
March 5, 2025 12:56 PM UTC
As the EU/EZ prepares for an almost certain trade spat if not trade war with the U.S. as the latter levies well-flagged and probably significant tariffs, we consider what is actually behind President Trump’s ferocity regarding bilateral trade. As has been suggested widely, the EZ does not actual