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    Muller says current rates support economic recovery and boost financial markets and growth prospects.

    by VT Markets
    /
    Sep 12, 2025
    The European Central Bank (ECB) has successfully reduced inflation and interest rates without harming the job market. Meanwhile, the Federal Reserve is set to cut rates soon, which is likely to benefit financial markets and global growth.

    Potential Effects of Rate Cuts

    The possible impacts of rate cuts are key factors for the ECB to consider. The current interest rates are well-suited for today’s economic conditions. For now, the ECB is likely to keep interest rates stable. With August 2025’s Eurozone inflation rate at 2.3%, we are close enough to the target to pause on any changes. This stability may reduce short-term interest rate swings in Europe and could be an ideal time to sell options on EURIBOR futures for profit. In contrast, the United States is heading towards rate cuts, with the CME FedWatch tool showing an 85% likelihood of a cut by the December 2025 meeting. This creates a notable difference in policy compared to the ECB, which typically strengthens the euro against the dollar. Traders may want to use options to prepare for a potential increase in the EUR/USD exchange rate. This cautious approach is supported by a strong job market that has managed to cope well with the rate hikes from 2023. The latest data from Eurostat shows unemployment remains low at 6.4% across Europe. This economic strength gives the ECB less reason to rush into rate cuts, favoring a stable policy in the near future.

    Impact on European Stocks

    The anticipated rate cuts by the Fed are already uplifting European stock markets. For instance, the Euro Stoxx 50 index has risen over 5% in just the past month. Traders might consider buying call options or using bullish call spreads on key European indices like the DAX to take advantage of this positive trend. Create your live VT Markets account and start trading now.

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