Markets Cheer Strong EU Growth, But Geopolitics Cap the Rally
European stocks move higher on Friday as the Eurozone GDP for Q1 is revised higher, as predicted by ECB President Lagarde
The eurozone economy delivered an upside surprise today, with Q1 2025 GDP revised sharply higher to 0.6%, marking the strongest quarterly growth since Q2 2022. This comes after last month’s downgrade to 0.3%, highlighting an unexpectedly robust start to the year.
The revision triggered a knee-jerk rally in European equities, with the DAX 40 and STOXX 600 surging in early trade. However, that initial optimism was tempered, as broader market sentiment remained wary. Heightened geopolitical uncertainty—particularly the increasingly public fallout between Donald Trump and Elon Musk—has kept risk appetite in check. As a result, European indices are likely to log modest gains through the session, balancing upbeat domestic data with global caution.
DAX 40 1-minute chart
(Past performance is not a reliable indicator of future results.)
A Hint from the ECB?
The stronger GDP print was indirectly flagged on Thursday by ECB President Christine Lagarde, who cited stronger investment and front-loaded orders amid tariff fears. Markets have responded quickly: odds of the ECB holding rates steady in July have risen to 82%, up from 75% just after Thursday’s ECB meeting. The central bank has already cut rates by 200 basis points over the past year, and the improving economic backdrop supports a more patient stance moving forward.
Source: refintiv
Currency Reaction: EUR/USD Volatile on Crosscurrents
The euro found initial support on the back of the GDP revision and rising expectations of an ECB pause. However, EUR/USD has since come under renewed pressure, as the U.S. dollar firmed ahead of the latest non-farm payrolls report. Markets expect 130,000 new jobs and a steady 4.2% unemployment rate.
While the dollar’s rebound may prove temporary—particularly given the ongoing political turbulence in the U.S.—EUR/USD remains rangebound for now. A break above the 1.15 level remains on the radar if dollar headwinds intensify.
EUR/USD daily chart
(Past performance is not a reliable indicator of future results)