And if those forecasts weren’t enough, analysts from Société Générale just put out new forecasts. For the US, they forecast positive growth even for our stagnating friend the Eurozone in 2026. According to this latest data, the US economy is on track for a GDP growth of 2.1%, a marginal increase from earlier estimates. Meanwhile, the Eurozone’s growth forecast has been adjusted to 1.2%, reflecting modest improvements in the region’s economic outlook.
These latest net upward revisions happen against a backdrop of generally improving economic indicators on both sides of the Atlantic. In our last US-Eurozone comparison in April, the US growth forecast was 1.4%, Eurozone just behind at 1.1%. These recent figures indicate market expectations have significantly increased in the last few months. This positive change has not made much impact on the currency markets.
Yet even in a period of very positive growth projections, the US dollar has steadied—not seen the expected dollar-positive rally take place. Analysts point out that this stabilization comes from consistent rate differentials. That is a big sign the market has not materially changed its expectations for interest rates, even with an improvement in growth outlook.
“The upward adjustment in US growth expectations has seen the dollar stabilize rather than rally, because the market hasn’t shifted rate differentials.” – Société Générale FX analysts
In Europe, the positive revision in growth prospects has gone hand in hand with a drop in expected ECB rate cuts. Recent moves in the European Central Bank’s statements and policy guidance are catalyzing this movement. The Federal bank has made it very clear that they are taking a much more careful consideration into their monetary easing.
“By contrast, a modest upgrade in European growth expectations (from 1.1% to 1.2%) has been accompanied by a gradual erosion in ECB rate cut expectations, fuelled in large part by ECB rhetoric.” – Société Générale FX analysts
Unfortunately, the picture is not so rosy across the Atlantic or in the new growth superpower. There are external factors beyond these industries’ control, such as central bank policies that could influence how these forecasts materialize in real life.