Barclays (LON:BARC) provided an analysis of the current economic situation, noting that despite the high levels of interest rates, their stabilization is aiding in the alleviation of inflation concerns associated with "Trumponomics."
This stability is also contributing to reduced equity volatility. The Federal Reserve maintained its rates this week, aligning with market expectations, while the European Central Bank (ECB) proceeded with a rate cut.
Barclays pointed out that although there has been a recent increase in some activity indicators in Europe, additional monetary stimulus is necessary to ensure a sustained and broad recovery.
The firm's economists continue to predict that the Federal Reserve will conclude the year with rates at 4.25%, and the ECB at 1.50%, even after the recent upward repricing of Overnight Indexed Swap (OIS) curves.
The widening rate differential through 2025 is expected to limit any significant recovery in the EUR/USD exchange rate. However, this scenario is beginning to benefit the region's earnings and broader growth prospects.
A weaker euro is already contributing positively to Europe's earnings per share (EPS) revisions, as indicated by early earnings season results.
Recent quarterly earnings update highlighted that European companies have reported stronger top-line beats.
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