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First: European monetary policy
- The European Central Bank cut its deposit facility interest rate by 25 basis points to 2%.
- The decision was in line with expectations, given the decline in energy prices and the strength of the euro.
- Inflation forecasts for 2025 and 2026 have been lowered to 2%, down from 2.3% previously.
- The central bank did not provide any clear indications about the future path of interest rates, leaving analysts divided on future trends.
Second: Economic growth in the Eurozone
- The bank maintained its 2025 GDP growth forecast at 0.9%.
- Despite the strong performance in the first quarter (+0.3%), the outlook for the second quarter and the second half of the year remains cautious.
- The bank noted that government investments in infrastructure and defense could boost growth in the medium term despite trade uncertainty.
Third: Developments in US-China relations
- President Donald Trump held a phone call with Chinese President Xi Jinping, sparking market optimism that the trade deadlock could be broken.
- The call was confirmed to have been initiated by Trump, but details were not revealed, dampening the initial optimism.
- Trade relations between the two countries are experiencing a period of tension despite preliminary agreements reached in Geneva in recent weeks.
- Washington accused Beijing of slowing down its commitments regarding the export of critical minerals.
- China expressed anger over the restrictions on new student visas and considered US warnings against the use of Chinese semiconductors to be detrimental to progress in negotiations.
Fourth: US labor market data
- Weekly unemployment claims rose to 247,000, compared to expectations of 236,000.
- This increase exceeded expectations and may raise questions about the strength of the US labor market, weighing on the Federal Reserve’s monetary policy outlook.
Fifth: Market reactions
- US stocks opened higher after the Trump-Xi call, but gains were later pared due to a lack of details.
- European markets were mixed, with the Stoxx 600 initially flat and then down 0.2%.
- The euro rose 0.6% against the dollar following the European Central Bank’s decision.
