European markets began the week on a moderately positive note, buoyed by an unexpected softening of the US stance on the trade front. While Donald Trump announced late last week the introduction of 50% tariffs on European products starting June 1, the decision was ultimately suspended. A call between the US President and Ursula von der Leyen led to the postponement of this deadline to July 9, leaving a six-week window for negotiations. This change of stance, undoubtedly tactical, temporarily calms tensions, but once again highlights the chronic instability of transatlantic trade relations.
For several weeks, the US strategy has consisted of multiplying tariff threats without necessarily carrying them out. This successive pressure game aims to force partners to come to the negotiating table while limiting the short-term economic fallout. In this sense, the maneuver appears to be effective on the markets, with a rebound in the euro against the dollar and a rebound in equities today. Fundamentally, however, the climate of uncertainty remains intact, particularly as the US budget deadline approaches, which has still not found a solution in the Senate.
The Fed, aware of this unstable environment, favors the status quo. Several of its members, including Neel Kashkari, have indicated that the conditions are not yet in place to resume rate cuts. The Fed could wait until September to adjust its policy, awaiting clearer signals on the fiscal trajectory, inflation trends, and the strength of the labor market.
In the eurozone, however, the tone is more confident. The ECB has additional room for maneuver thanks to recent wage moderation. According to the latest data, growth in negotiated wages fell to +2.4% year-on-year in the first quarter, compared to +4.1% at the end of last year. This shift is reducing inflationary pressures in services, traditionally more sensitive to wage dynamics. Philip Lane, Chief Economist of the ECB, also reaffirmed his confidence in the gradual return of inflation towards the 2% target, suggesting two further rate cuts before the end of the year.
This monetary environment is now complemented by a stronger fiscal stimulus, particularly in Germany, where the plan to completely rearm the armed forces by 2029 is beginning to take shape. In the medium term, this momentum could support investment, domestic demand, and reindustrialization in the eurozone, within a more resilient and autonomous framework.
