Markets under the spell of US politics

The capital market expects key interest rates to be lowered on both sides of the Atlantic this year. In the US, the labor market weakened somewhat over the course of last year and GDP growth was negative in the first quarter. The Eurozone economy could also benefit from a less restrictive monetary policy, as the new US tariff regime will take its toll on the economy and the German economic stimulus package and Eurozone-wide defence spending have yet to kick in. We expect the ECB to cut its key interest rate by 0.25%. For the US, we anticipate two interest rate cuts by the end of the year.