Eurozone: Economy holds up better-than-expected in 2Q – UOB Group

Source Fxstreet

The European Union (EU) continues to work with the US to finalise a Joint Statement, as agreed on 27 Jul, when both EU head Ursula von der Leyen and US President Donald Trump struck a deal on tariffs. The EU-US trade deal was announced at Trump's luxury golf course in western Scotland after an hour-long meeting, UOB Group's economist Lee Sue Ann reports.

ECB in wait-and-see mode

"The European Union (EU) continues to work with the US to finalise a Joint Statement, as agreed on 27 Jul, where both EU head Ursula von der Leyen and US President Donald Trump struck a deal on tariffs. The centerpiece is a 15% baseline tariff on almost all European exports to the US, except for steel, aluminum and pharmaceuticals."

"The EU-US trade deal may have helped avoid a deeper trade conflict, but the ongoing uncertainty and increased costs for EU exporters, as well as weakening external demand are likely to keep economic growth subdued through the rest of the year. We have nonetheless revised out forecasts for Eurozone GDP growth to 0.9% (from 0.5% previously), and 1.1% (from 1.0% previously) for 2025 and 2026, respectively."

"The European Central Bank (ECB) is expected to take a cautious and datadependent approach. At this juncture, we expect a 25-bps cut at the next ECB meeting on 11 Sep, and we see the ECB cutting again by 25 bps in Oct or Dec. We recognize that the ECB is approaching the end of its current rate cutting cycle; but much depends on how tariffs, growth and inflation evolve."

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