EURUSD Poised Between Slowdown Risks and Stimulus Hopes

Global markets are navigating a mix of slowing growth, shifting monetary policy expectations, and mounting trade tensions. In Europe, economic momentum has cooled sharply, yet fiscal measures and investment flows are keeping optimism alive. The ECB is holding a steady course on rates, while technical signals for EURUSD hint at potential upside if current trends hold. Across the Atlantic, US policy debates are intensifying, with calls for bold rate cuts amid a labor market losing steam under tariff uncertainty. Together, these developments are shaping a delicate balance between cautious stability and the need for decisive policy action.

Eurozone Recovery Falters, But Optimism Lingers Amid Fiscal Boost

Eurozone growth nearly stalled in Q2 2025, with GDP rising just 0.1% and industrial output slumping 1.3%, raising fears the recovery is losing steam. The slowdown contrasts with the US, which grew 0.7% over the quarter. Spain and Portugal led gains, but Germany, Italy, and Ireland contracted. Eastern Europe showed resilience, buoyed by NGEU funds. While structural challenges—high energy costs, weak investment, and sluggish productivity—persist, sentiment is improving as fiscal shifts, stronger portfolio inflows, and public investment plans offer medium-term support. Goldman Sachs remains optimistic, forecasting above-consensus growth for 2025–2028.

ECB Seen Holding Rates Until Year-End

The European Central Bank is expected to keep interest rates at 2.00% in September, with most economists now predicting the next possible cut in December or later. Inflation is steady at the ECB’s 2% target, and growth is holding at trend levels despite a 15% US tariff on EU goods. Fiscal support, especially from Germany, and reduced uncertainty are helping maintain stability. Economists see eurozone growth at around 1.1% this year, rising slightly in the coming years, with no major change to the outlook since June.

Technical Analysis

Since reaching a high of 1.18290 on July 1, EURUSD has retraced over 3.5% before rebounding and reclaiming ground above the 20- and 50-period EMAs.

Technical indicators support the constructive outlook: the Momentum Oscillator has crossed above its 100 baseline, signalling strengthening upside pressure, while the RSI holds above 50, pointing to sustained buying interest.

If the current technical structure remains intact, upside objectives sit at 1.18290, followed by 1.18861 and 1.19295. Conversely, a deterioration in momentum or sentiment could shift focus toward support at 1.15553, 1.14942, and 1.13906.

Fed Chair Contender Urges Bold Rate Cuts to Protect Jobs

A leading contender for the next US central bank chief is calling for aggressive interest rate cuts, arguing that monetary policy is too restrictive and risks slowing the labor market. Despite hotter-than-expected inflation data, the candidate supports a half-point reduction at upcoming meetings, with potential for deeper cuts if technology-driven disinflation takes hold. The shortlist for the role has expanded, with several voices backing faster easing to support job growth and economic momentum.

US Job Growth Stalls as Tariff Uncertainty Bites

The latest US jobs report shows the labor market slowing sharply, with far fewer jobs added in July than expected and earlier months revised downward. Hiring is stagnating as businesses hold back on investment due to uncertainty over tariffs, despite some growth in healthcare and social assistance. Manufacturing jobs have fallen for three straight months, pressured by higher costs from import duties on metals. While officials portray the weakness as temporary and tied to trade policy adjustments, experts warn that prolonged uncertainty could turn slow hiring into layoffs.

Conclusion

In summary, both the eurozone and the US face economic headwinds, though for different reasons—Europe grapples with slowing output but finds support in fiscal initiatives, while the US contends with policy uncertainty and a weakening labor market. Central banks on both sides are weighing their next moves carefully, balancing the need to maintain stability with pressure to stimulate growth. In markets, EURUSD’s technical setup offers potential upside if momentum holds, but broader trends will hinge on how policymakers navigate the challenges ahead.