Germany’s economy grew by 0.2% in the first quarter of 2025, according to preliminary figures released Friday, matching market forecasts. This modest rebound follows a 0.2% contraction in the previous quarter and signals a fragile but welcome return to growth for Europe’s largest economy.
The upturn was supported by easing inflation and lower borrowing costs, which helped lift domestic demand and business investment. Consumer and business sentiment also improved, supported by the resolution of coalition talks and the formation of a stable federal government earlier in the year. The political clarity provided a tailwind, offering reassurance to markets amid broader uncertainty.
Still, underlying challenges persist. Compared to a year ago, Germany’s gross domestic product (GDP) declined by 0.2%. This marks the seventh consecutive quarter of year-on-year contraction, highlighting the enduring impact of structural weaknesses and global economic pressures. Trade tensions, particularly stemming from shifting U.S. tariff policy, continue to weigh on sentiment and export performance.
Economists caution that while the quarterly growth is a step forward, it does not yet signal a strong or sustained recovery. Germany will need continued policy support and a more stable global backdrop to build on this early momentum.
Global markets traded cautiously as shifting Federal Reserve expectations and easing geopolitical risks continued to shape sentiment. President Trump warned he'll bomb Oman if it stands in Washington's way, as reports suggest Iran and Oman are moving toward a deal on Strait of Hormuz control.
Global markets started the week with the dollar under pressure as softer U.S. retail sales, inflation, and consumer sentiment reduced expectations for a September Federal Reserve rate hike.
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Cooling US Data Weakens Dollar Amid Energy Risks (17 – 21 August)Global markets entered the week with the US dollar under renewed pressure as softer inflation, retail sales, and employment data reduced expectations for another near-term Federal Reserve rate hike. The Dollar Index traded around 99.61, while markets assigned roughly a 65% probability that the Fed will keep rates unchanged at 3.50%–3.75% in September. Gold and silver extended their gains as the shift in Fed expectations supported precious metals, while the euro and pound benefited from the dollar’s declining yield advantage.
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