Bank of America just raised its EUR/USD forecast
Investing.com - The eurozone economy grew slightly faster than expected in the second quarter, but growth remains meager and the world’s second-largest economic bloc will have to cope with U.S. tariffs going forward.
The 20 nations sharing the euro currency saw their economy expand by 0.1% in the first quarter, beating expectations for no growth at all, Eurostat data showed. However, this still represented a sharp slowing of growth from 0.6% in the first quarter.
On an annual basis, eurozone GDP rose 1.4%, above the 1.2% expected, but still below the 1.5% growth seen in the prior quarter
The eurozone has barely grown over the past several years as businesses held back investment and households tried to rebuild wealth lost due to high inflation.
This was even before the latest escalation in trade tensions under the Trump administration, which has used the threat of sweeping import tariffs as one of its negotiation tools.
In May, the European Commission cut its forecast for growth in the eurozone economy, saying gross domestic product will grow only 0.9% this year, rather than the 1.3% expected last November.
In 2026, eurozone growth should accelerate to 1.4%, but that would be still lower than the 1.6% the Commission had expected six months ago.
However, the Commission said the growth outlook was based on an assumption that the U.S. would keep its tariffs at the current level of 10% on all EU goods.
The European Union and the U.S. announced a framework trade deal over the weekend. This has removed some of the uncertainty, but the U.S. is now set to impose a 15% import tariff on most EU goods from next month.
Some of Europe’s largest firms - including German sportswear brand Adidas (ETR:ADSGN) earlier Wednesday - have issued warnings in recent days that tariffs will weigh on profits, hold back sales and may curtail investment.
On an individual country basis, data released earlier in the session showed that Germany’s economy, the eurozone’s largest, contracted by 0.1% in the second quarter, marking a reversal from the 0.4% growth recorded in the first quarter.
The Italian economy also fell 0.1% in the second quarter from the previous three months, an unexpected drop given the forecast for a 0.1% rise quarter-on-quarter.
There was better news from the eurozone’s second-biggest economy, as the French economy grew 0.3% in the second quarter, beating the 0.1% forecast, helped by a rebound in household spending.