Stocks Fluctuate, Dollar Stays Steady in 2025 Start

Image Credit: Reuters

European and Global Markets Outlook by Ankur Banerjee

Stock markets have brushed off a lackluster start to 2025, but the persistent "higher-for-longer" U.S. interest rate outlook continues to bolster the dollar's strength, keeping the euro and sterling near multi-month lows.

Investors remain cautious about the U.S. Federal Reserve’s gradual rate-cut trajectory for 2025 while weighing the potential impact of President-elect Donald Trump's policies on inflation, economic growth, and tariffs.

European equities are expected to open on a subdued note, following a strong end to the week in Asia, led by gains in South Korean stocks. Japanese markets remain closed for a holiday. The focus will be on whether the pan-European STOXX 600 index can sustain its steady momentum after rising 6% in 2024.

European markets and the euro have faced pressure in recent months due to uncertainty over differing interest rate paths between Europe and the U.S., as well as political challenges in France and Germany. Sentiment has also been dampened by the looming threat of tariffs under the Trump administration.

The euro remains near its lowest level since November 2022 after losing over 6% in value last year. Market expectations of significant rate cuts by the European Central Bank (ECB) in 2025—at least four reductions of 25 basis points each—contrast with expectations of only one or two such moves by the U.S. Federal Reserve.

Meanwhile, the British pound has held up better than most G10 currencies against the dollar’s strength, slipping just 1.7% in 2024. Despite this resilience, the pound hit a nine-month low at the start of the New Year and continues to hover near those levels.

 

 

 

 

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.