Synopsis:

Société Générale sees European currencies treading water in the near term, weighed down by tariff uncertainty and lingering doubts about Germany’s fiscal stimulus. However, they still expect an eventual breakout higher, once positive policy shifts and US growth headwinds filter more clearly into FX markets.

Key Points:

• Tariff Risks Cloud the Outlook:
  Looming trade actions and tariff headlines are likely to dominate sentiment, making it hard for EUR and GBP to rally cleanly in the near term.

• Doubts About German Fiscal Stimulus Impact:
  Despite optimism around increased German spending, markets are not fully convinced of its growth payoff, tempering euro upside.

• Supportive Macro Mix Still in Play:
  A better mix of fiscal and monetary policy in the Eurozone, plus weaker US growth due to policy activism, remains a medium-term tailwind for EUR and GBP.

• CHF and SEK Outperform on Niche Themes:

  • CHF has benefited from renewed geopolitical concerns, such as oil sanctions on Russia.

  • SEK longs remain popular, tied to European defense investment themes.

• Range-Bound for Now, But Not Forever:
  SocGen expects EUR/USD and GBP/USD to stay range-bound in the near term amid choppy conditions, but still projects eventual upward breaks as macro tailwinds strengthen.

Conclusion:
In the short run, tariff noise and skepticism about European fiscal policy may cap further EUR and GBP strength. But SocGen remains constructive medium-term, with a break higher in EUR/USD and GBP/USD still expected once positive drivers gain traction and market volatility abates.