Europe’s economy stagnated late last year as its former growth engine, Germany, finished a second straight year of shrinking output.

Eurozone GDP stagnated in Q4 2024 as Germany (-0.2%) and France (-0.1%) contracted, reinforcing expectations of more ECB rate cuts. The euro held at $1.04, while bond yields fell. The ECB-Fed policy gap widens as Powell signals "no rush" for rate cuts.

Eurozone growth slowed to a halt in the fourth quarter last year, dragged by contractions in major powers Germany and France which were held back by economic headwinds and political instability. At one end of the eurozone spectrum Spain saw its economy expand by 3.

The stuttering economic performance, coupled with an outlook overshadowed by the risks of trade tension with the U.S. and China, mean that the European Central Bank is almost certain to cut its key interest rates again Thursday, bringing its key deposit rate down to 2.75 percent.