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Citing sources with direct knowledge of the European Central Bank (ECB) thinking, Reuters reported on Wednesday that the “Eurozone growth is expected to take a bigger hit from US President Donald Trump’s tariffs than the ECB earlier estimated.” Additional takeaways “Initial ECB estimate of 50 bps hit to growth in first year under revision.” “One source estimates growth hit in excess of 100 bps in first year.” Market reaction At the time of writing, EUR/USD is sustaning the pullback from near 1.1100 levels, still up 0.66% so far. GDP FAQs A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted. A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital…

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Filed under: News - @ April 9, 2025 9:24 am