DWS has signaled that the European Central Bank is likely to implement further interest rate increases, despite evidence that the European economy is proving more resilient than anticipated amid ongoing geopolitical friction in the Strait of Hormuz.
The asset manager’s assessment comes as European equity markets posted a broad-based advance on Monday, driven by a relief rally following the announcement of a new framework agreement between the United States and Iran.
The diplomatic development has helped ease immediate fears of a prolonged shipping blockade, though maritime traffic through the strait remains under scrutiny.
DWS highlighted that while the economic data has surprised to the upside, the underlying inflationary pressures and geopolitical risks necessitate a cautious monetary stance.
The firm’s view suggests that the ECB may not be done tightening, even as markets have begun to price in a pause or pivot.
This divergence between market sentiment and institutional outlook underscores the complexity of the current regime.