Euro Could Fall as U.S. Recession Fears, German Fiscal Optimism Look OverdoneÂ
The euro could weaken in the near-term after its recent rally on U.S. growth concerns and optimism over Germany’s fiscal spending plans, Commerzbank analyst Michael Pfister says in a note. “The market has got a bit ahead of itself in its current assessment.” The U.S. is unlikely to enter a recession as some market participants fear, he says. Rather, growth should remain “quite strong” this year. Furthermore, Germany’s fiscal stimulus proposal probably won’t have an effect on the economy until next year at the earliest, he says. Commerzbank expects the euro to fall to $1.05 by the end of the second quarter from $1.0845 currently.
Frankfurt’s DAX index extended its losses in afternoon trading, sliding 1% to 22,450, as escalating trade tensions between the U.S. and the EU dampened investor sentiment.
U.S. President Donald Trump threatened to impose 200% tariffs on European wines, champagnes, and other alcoholic beverages after the EU moved to slap a 50% tariff on American whiskey in retaliation for previous U.S. duties on European imports.
Meanwhile, concerns over prolonged conflict in Ukraine deepened after Russia dismissed the proposed U.S. ceasefire deal as merely a “temporary respite,” accusing Washington of imitating peace efforts.
Investors also remained cautious as the German parliament continued debating reforms to the country’s debt brake.
It’s been a roller-coaster ride for German shares in the last few weeks – you’ve probably noticed – as traders try to price major uncertainties in tariffs, domestic politics and grand geopolitical strategy.
And Deutsche Bank have a good stat. They note Wednesday was the eighth consecutive session where the DAX has moved by at least 1% in either direction.
If the blue chip benchmark manages a ninth, that’d be the first time since the pandemic turmoil of early 2020.
Will it make it? Well it’s down 0.4% after morning trading, so it might have to get a move on.