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Sprout Social stock price has remained under pressure this year as the company’s growth trajectory slowed. SPT was trading at $32.45, down by over 77.5% from its all-time high, bringing its valuation to about $1.86 billion.

Good product, but sales growth is a concern

Sprout Social is a top software company used by companies like HP, Cintas, Atlassian, and Rackspace. Its service is used by over 31,000 customers globally.

Its product lets companies post and manage their social media accounts like X, Facebook, LinkedIn, Pinterest, and TikTok. In addition to posting, the company provides these firms with analytical tools that lets them see and interpret their data.

Sprout Social’s biggest challenge is that it operates in a highly competitive industry. Hootsuite is its biggest competitor, followed by firms like Sendible and Zoho Social.

Its other top competition comes from social media platforms themselves since one can easily send and analyze posts without a subscription.

Sprout Social’s business has grown in the past few years, with its revenue moving from $102.7 in 2019 to over $333.6 million. Estimates are that its annual revenue will get to $405 million this year, followed by $464 million next year.

The most recent quarterly results showed that Sprout Social’s revenue rose by 20% in Q3 to $102.6 million. Analysts expect its fourth-quarter revenues to be $106.7 million, up by 14% from last year’s period. It will then make $110 million next year.

A key challenge that Sprout Social has faced is that of profitability. Its annual loss stood at over $66.4 million in 2023, up from $50.2 million in the previous year. The company’s trailing twelve-month loss was $67.1 million.

SPT’s valuation concerns

The biggest concern for Sprout Social is that its business will likely find it difficult to sign big customers in the future since most companies have a social media software.

Sprout Social’s stock is also not cheap as it has a forward price-to-earnings ratio of 69.50, much higher than the sector median of 25. Its valuation metric is also much higher than that of other fast-growing companies like NVIDIA and Microsoft.

The best valuation metric to use for a software company like Sprout Social is known as the Rule of 40. This is an approach where one looks at a firm’s growth and profitability metrics. Ideally, a company is said to be fairly valued if the metric comes in at above 40.

In Sprout Social’s case, the company has a revenue growth of 26% and a forward – or estimated one of 22%. The company is not yet profitable; its net margin was minus 17%. By adding its revenue growth and margins, we can estimate that the rule of 40 metrics is just 5, meaning that the company largely focuses on growth at the expense of profitability.

Sprout Social stock price analysis

SPT stock by TradingView

The weekly chart shows that the SPT stock price has been in a strong downward trend after peaking at $145 in 2022. It has moved to $32, dropping its market cap from $8.7 billion to today’s $1.6 billion.

Sprout Social’s stock has remained below the key support level at $38.31, its lowest level in May 2023 and May 2022. It even formed a break and retest pattern, a popular continuation sign.

Therefore, the SPT share price will likely continue falling as sellers target the next key support level at $25.30, its lowest level this year.

The post Sprout Social stock is down 77% from ATH: time to buy the dip? appeared first on Invezz

Stocks

Coursera stock price analysis: will this edtech giant rebound?

Coursera stock price has crashed to a near-record low as the company’s business growth decelerates amid an uptick in AI use. COUR was trading at $8.31, a few points above the record low of $6.26.

Growth momentum easing

Coursera and other similar edtech companies like Udemy and Chegg are struggling as more customers turn to artificial intelligence tools to learn.

Udemy’s stock has crashed by over 76% from its highest point this year, while Chegg has become a penny stock.

Coursera’s business has showed signs of slowing down. The most recent results showed that the company’s revenue rose by just 6% to $176 million in the third quarter. Analysts expect that its revenue will be $176 million in the fourth quarter.

If these revenue estimates are accurate, its annual revenue will be $691 million, a 8.8% increase from what it made last year.

Analysts also expect that Coursera’s revenue growth will decelerate further in the next few years. For example, its revenue will be $737 million in 2025, a 6.6% increase. On the positive side, Coursera has a long history of beating analysts’ consensus on revenue and earnings.

The case for COUR stock

A contrarian case for the Coursera stock price can be made even as its growth slows. First, its business is seeing some growth across all its segments. The most recent numbers showed that its consumer segment had a revenue of $102.3 million, a 3% YoY growth during the quarter. This division lets customers watch video lectures for free and then pay a fee for the certificates.

Coursera’s enterprise division is growing faster as its revenue rose by 10% in the quarter. This is notable growth since the division has a segment margin of 70% compared to the consumer’s 54%.

The last smaller division, degrees, also grew by 15% to $13.4 million during the quarter. While this is a small segment, it is also the most profitable since it has a segment margin of 100%.

The other important case for Coursera is that the fear that AI will disrupt its business is highly exaggerated. While platforms like ChatGPT and Claude are great platforms, they cannot replace the solutions offered by Coursera. For one, their platforms cannot offer the degrees that Coursera offers.

Coursera also benefits from partnering with some leading companies and universities. Some of its most notable partners are the Imperial College London, Stanford, Penn University, Google, and Duke.

Coursera also has a strong balance sheet with over $719 million in cash and equivalents and over $821 million in current assets. Its current liabilities are $314 million, bringing its working capital at over $405 million. It also has no debt, meaning that it can survive the ongoing slowdown without needing to raise additional capital.

Coursera is also on a path to profitability. Analysts expect it to earn $0.3 per share this year and $0.34 in 2024. This means that its profit margin will continue expanding in the coming years, helping to justify its valuation.

Coursera stock price analysis

COUR stock chart by TradingView

The daily chart shows that the COUR share price has been pressured and moved sideways in the past few weeks. It has formed a double-bottom chart pattern at $6.26, where it failed to move below in July and November this year. A double-bottom is one of the most bullish chart patterns in the market.

Coursera stock has moved above the 50-day and 100-day Exponential Moving Averages (EMA), which are about to form a bullish crossover. Therefore, a contrarian case for the company exist. If it works out, the next point to watch will be at $11.75, its highest point on July 26, about 42% above the current level.

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Stocks

As the ZipRecruiter stock price implodes, will it rebound in 2025?

ZipRecruiter (ZIP) stock price has imploded and crashed to a record low as concerns about its growth in a difficult job market continue. It has slipped to an all-time low of $7.13, down by almost 80% from its all-time high. This crash has brought its valuation to below $700 million.

ZipRecruiter’s growth problem

ZipRecruiter is a well-known company by individuals and companies in the United States and worldwide. Its technology lets companies create job descriptions and post them on multiple job listing platforms.

Users can also search for jobs and apply on its platform. The challenge, however, is that this market is highly competitive, with a platform like LinkedIn, which is owned by Microsoft, having a substantial market share.

ZipRecruiter’s business has been rough in the past few years as its growth slowed and competition rose. Its annual revenue jumped from $429.6 million in 2019 to $904 million in 2022 as the pandemic happened.

Its annual revenue then dropped to $645 million in 2023 and to $498 million in the trailing twelve months.

The company blamed the slowdown on the labor market as recent numbers showed that the unemployment rate rose to 4.2%. Many large companies are no longer hiring as they did in the past as they focus on efficiency.

The most recent results showed that its business continued to deteriorate. Revenue dropped by a whopping 25% to $117 million, and the number of quarterly-paid employees dropped by 27% to 65.2k.

The results also showed that its losses continued to mount, with a net loss of over $2.6 million. Its adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) were $15 million.

The company expects that its revenue for the fourth quarter will be between $104 million and $110 million. That will be a big drop from the $135 million it made the same period a year ago. The average estimate among analysts is that its revenue will be $107.7 million, down by 20% on a YoY basis.

Annual revenue will drop by 27.1% year over year to about $470 million. Analysts also expect that in 2025, revenue will fall to $465 million, continuing a long-standing trend.

The challenging labor market and AI

Other recruiting companies have also plunged this year. Kelly Services stock has imploded by 40%, while Robert Half has dropped by almost 20% in the same period. Manpower Group stock has fallen by 28% this year.

ZipRecruitor’s biggest challenge is that more companies have embraced LinkedIn because of its unique dataset. LinkedIn has over 1 billion users worldwide and many companies find recruiting there being easy. It also faces competition from firms like Indeed, Glassdoor, Monster, and even Craigslist.

ZipRecruitor is not adding paid customers as the number dropped by 27% on a YoY basis, which the firm blamed to SMBs and the uncertainty in the labor market. The revenue that these companies pay is also not growing.

Artificial intelligence has also disrupted the company’s business, allowing companies to hire faster and bypass traditional listing boards.

The hiring market may face a difficult year in 2025 as companies prepare for a new trade war.

ZipRecruiter stock price analysis

The daily chart shows that the ZIP share price has been in a steady downward trend this year. It recently crossed the important support level at $7.22, its lowest swing on August 7. It invalidated the double-bottom chart pattern, a popular bullish sign.

ZipRecruiter stock price has remained below the 50-day and 200-day Exponential Moving Averages (EMA). Also, the MACD and the Relative Strength Index (RSI) have continued moving downwards. It is also below the descending trendline that connects the highest swing in July 2023.

Therefore, the stock will likely continue falling as sellers target the crucial support level at $6.

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Stocks

Will the falling Hims & Hers stock price recover in 2025?

Hims & Hers stock price has greatly performed this year as it continued to disrupt the healthcare industry. HIMS has jumped by almost 200% this year, while other companies in the industry like CVS Health and Walgreens Boots Alliance and CVS Health, plunged. So, will the stock have more upside in 2025?

HIMS stock fell after a key FDA ruling

One reason why the Hims & Hers stock price surged has been its entry into the weight loss industry, where it offers quality drugs at a lower cost.

This business may be under pressure soon, which explains why the stock has crashed by more than 25% from its highest level this year.

In a statement last week, the Food and Drug Administration (FDA) warned that it was concerned about many weight drugs being sold in the market. In particular, it expressed concerns about compounded drugs, which it said were not approved.

The FDA noted that it had received adverse events related with compounded semaglutide and tripeptide. Therefore, it is likely that Hims & Hers business will be affected because the weight loss segment is one of its fastest-growing segments.

The company is seeing strong growth

Hims & Hers stock price surged this year as its business continued doing well because of its large total addressable market. As we have written before, its top markets like weight loss, hair loss, anxiety, and sexual health have a large total addressable market. For example, a report by Oxford noted that over 25% of men in the United States had an erectile dysfunction problem.

Estimates are that millions of Americans have weight issues. According to the CDC, about 9.4% of all Americans had an obesity problem. Also, more people are now more comfortable buying these drugs online, which was not the case a few years ago.

These trends explain why the Hims stock price has done well in the past few years. Its annual revenue stood at just $82.6 million in 2019, making it a fairly small company. Recently, however, its revenue has soared, hitting over $872 million in 2023 and $1.2 billion in the trailing twelve months.

The most recent results showed that the Hims & Hers revenue jumped by 77% YoY to over $401.6 million. Analysts expect that this growth is just starting, with the current quarter’s revenue rising by 90% to over $469 million.

The average estimate is that Hims & Hers annual revenue will get to $1.45 billion this year, followed by $2.03 billion in 2026. This trend makes it one of the fastest-growing companies in the healthcare industry.

Hims & Hers is seeing profitable growth. The average estimate is that its EPS will be 22 cents in this quarter, up from $0.05 a year ago. Its annual EPS will move to 8 cents this year, followed by 93 cents in the following year. This growth will help the company justify its high valuation, with its market cap standing at over $5.7 billion today.

Hims & Hers stock price analysis

The daily chart shows that the HIMS share price peaked at $35 in November. As we predicted, it erased some of those gains after the FDA ruling.

The stock’s retreat has seen it retest the important support level at $25.75, its highest swing on June 17. This pattern is known as a break and retest, and is one of the most bullish continuation signs.

The stock has found support at the 50-day Exponential Moving Average. Therefore, there are odds that the stock will bounce back soon and retest the important resistance point at $35, the year-to-date high. A drop below the support at $22 will invalidate the bullish view.

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World News

US inflation cools in November, offering relief amidst Fed concerns

The latest economic data reveals a welcome moderation in inflation, as the personal consumption expenditures (PCE) price index rose by a less-than-expected 0.1% in November.

This figure, a notable decrease from October’s unrevised 0.2% gain, coupled with solid but somewhat disappointing consumer spending, has provided some relief to markets that have been grappling with the Federal Reserve’s recent “hawkish” rate cut.

This report presents a complex picture for policymakers and investors alike, as they balance the need to control inflation with concerns about economic growth.

Inflation eases, but remains above target

The Commerce Department’s report on Friday also showed that the PCE price index increased by 2.4% in the year through November, up from 2.3% in October.

This slight rise in the annual inflation rate is partially attributed to lower readings from last year dropping out of the calculation.

Excluding the volatile food and energy components, the PCE price index climbed by 0.1%, a decrease from October’s unrevised 0.3% gain.

In the 12 months through November, core inflation increased by 2.8%, matching October’s figure.

This mixed set of data highlights that while price pressures are easing, inflation remains above the Fed’s 2% target.

Market reaction

According to a Reuters report, the market’s response to the inflation data was notable, as the S&P 500 pared some of its earlier losses, closing down -0.51%, while US Treasury 10-year yields fell to 4.506%, and the two-year yield declined to 4.259%.

The dollar index also showed a loss of 0.42%.

As Adam Sarhan, chief executive of 50 Park Investments, noted, “The market is having a little bit of a relief rally here… The Fed came out on Wednesday and said inflation is still public enemy No. 1. They cut rates but… inflation was still not where they wanted it to be.”

Sarhan also states that “So, it’s a bullish reaction from the major indices’ standpoint… because the data takes away the threat that inflation is out of control… Today’s data doesn’t force the Fed’s hand. It’s not hot enough where the Fed has to raise rates, and hence the relief rally. And we’re really oversold in the short term.”

Chris Zaccarelli, chief investment officer at Northlight Asset Management, told Reuters that “The market woke up in a terrible mood – an unexpected government shutdown and a more-hawkish-than-expected Fed are to blame – but this morning’s inflation data came in lower-than-expected and took some of the edge off.”

However, he also points out that “We expect the market will continue to sell off into the weekend, but we will be watching the last 15 minutes of trading today to see how we finish. If the selling builds throughout the day and there is momentum (to the downside) heading into the weekend then that would be a bad sign for next week, however, if we see some dip-buying later today and the market finishes significantly higher than the lows of the day would suggest, then that would make us more optimistic for next week.”

The market’s response seems to reflect a battle between short-term relief and lingering doubts about the Federal Reserve’s future actions.

The Fed’s balancing act

Brian Jacobsen, chief economist at Annex Wealth Management, told Reuters that, “Powell must be getting tired of the data undermining things he says. Lower inflation than expected and slower spending growth don’t corroborate the Fed’s sudden tilt towards hawkishness. The jump in auto sales isn’t likely going to be a massive driver of growth over the next year. Consumers aren’t shelling out more on everyday spending items. The Fed will likely change its tune once again sometime soon.”

The conflicting economic signals present a challenge for the Fed, further emphasizing the complexity of navigating economic policy amidst uncertain market conditions.

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World News

LATAM crypto update: El Salvador boosts Bitcoin buying amid IMF warning, MetaMask launches crypto debit card

This week, the LATAM cryptocurrency landscape demonstrated its dynamic nature once more.

El Salvador has decided to continue with its Bitcoin purchases, despite the IMF’s warnings, while MetaMask innovates by launching its crypto debit card for Mexico, Colombia and Brazil.

El Salvador has revealed plans to continue buying bitcoin, maybe at a faster pace, despite a financing arrangement with the International Monetary Fund (IMF) that proposes reducing its exposure to the cryptocurrency.

Stacy Herbert, director of El Salvador’s national bitcoin office, claimed that bitcoin will remain legal tender in the country and that the government will continue to add to its strategic reserves.

El Salvador signed a $1.4 billion loan agreement with the IMF on Wednesday, which included a review of its bitcoin rules, including the requirement that all tax payments be made in US dollars.

According to an IMF spokeswoman, anticipated legal amendments will make bitcoin acceptance voluntary in the private sector.

Analysts believe that the government’s effort to acquire more Bitcoin is a strategy to counter negative opinions of the cryptocurrency following the agreement with the IMF.

MetaMask launches crypto debit card in Brazil, Colombia, and Mexico

MetaMask introduced the MetaMask Card in Brazil, Mexico, and Colombia, a huge step forward for cryptocurrency followers in Latin America.

This unique debit card enables users to easily spend their digital assets in real-time anywhere Mastercard is accepted, signalling a significant shift in the accessibility of blockchain technology for ordinary expenditures.

The MetaMask Card works with the Linea network, allowing users to convert their cryptocurrencies, such as USDC, USDT, and WETH, into fiat currency on the fly at millions of businesses worldwide.

This technology, developed in collaboration with Mastercard and Baanx, has the potential to open up new paths for cryptocurrency usage in places where traditional banking institutions may be less resilient.

LATAM Crypto companies in legal “grey zones, according to Bitso report

According to Bitso, Latin America has a diversified regulatory landscape for cryptocurrencies, with Argentina, Brazil, Colombia, and Mexico setting the standard.

This regulatory mosaic causes legal confusion for Bitcoin users, forcing some businesses to operate in “grey zones” where the legality of their activity is unclear.

The report “From Barriers to Bridges: How Blockchain and Stablecoins Can Remap Cross-Border Payments in Latin America” examines the issues that the region’s businesses face.

The report underlines that, while blockchain technology and stablecoins have disruptive potential, many businesses feel forced to traverse uncertain legal frameworks due to a lack of clear rules.

The lack of stated prohibitions does not reduce uncertainty, making it harder for businesses to fully adopt blockchain technology into their operations.

As a result, the complicated regulatory framework highlights the need for greater clarity in supervision and compliance throughout the area.

Argentina’s tight currency controls and restrictive rules have long impeded cross-border trade.

Domestic digital payments, on the other hand, have thrived, with platforms like Mercado Pago gaining over 12 million users and real-time payment systems like Transferencias 3.0 becoming increasingly popular.

Despite the lack of a complete fintech law, Argentina’s regulatory requirements are often less stringent, allowing businesses to operate while adhering to consumer protection laws, digital signatures, tax regulations, and anti-money laundering policies.

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Politics

GBP/USD forecast: sterling outlook after the BoE, Fed decisions?

The GBP/USD exchange rate dived to its lowest level since May 2024 as the US dollar index surge gained steam. It dropped to a low of 1.2497, much lower than the year-to-date high of 1.3430 after the latest Federal Reserve and Bank of England (BoE) interest rate decisions.

Bank of England interest rate decision

The GBP/USD exchange rate continued falling as the Bank of England delivered a relatively dovish statement on Thursday.

The bank decided to leave interest rates unchanged at 4.75% as it remained concerned about the elevated inflation rate in the country.

Unlike the Fed and the European Central Bank, the BoE has already embraced a more gradual pace to interest rate cuts. It has slashed rates by just 0.50% this year, while the two other banks have cut by about 1%.

Still, there are signs that a more dovish tilt is emerging from the BoE as 3 officials voted to cut rates by 0.25%.

The BoE decision came a day after a report by the Office of National Statistics (ONS) showed that the headline Consumer Price Index (CPI) rose from 2.3% in October to 2.6% in November. Core inflation moved from 3.3% to 3.5%, still higher than the bank’s target of 2.0%.

The Retail Price Index (RPI) rose from 3.4% to 3.6%, while the harmonized inflation rate moved to 3.5%. These numbers meant that the country’s inflation remains stubbornly high and that the bank has room to leave rates unchanged for long.

UK is in a stagflation

The challenge, however, is that the UK is going through a stagflation process. Stagflation is a situation where a country goes through high inflation and slow economic growth. In theory, it is one of the most difficult situations to manage since cutting rates will lead to more growth, but cause inflation. High interest rates, on the other hand, hurt a country’s growth by limiting the economic growth.

Therefore, the GBP/USD pair crashed because analysts expect that the bank will be more dovish in the coming year. Most analysts expect it to cut rates by 55 basis points, while those at ING estimate that it will cut by 150 basis points. In a note, they said:

“The apparent growing dovish front within the MPC in spite of the latest hawkish wage data potentially suggests a greater focus on slowing activity. That reinforces our dovish view on the Bank of England for next year – we expect 150bp of cuts, against market expectations for around 55bp.”

The GBP/USD pair crashed also because of the hawkish Federal Reserve. In a statement, the Fed hinted that they will deliver two rate cuts in 2025, lower than the previous estimation of four. That hawkish tone pushed the US dollar index to the highest level in over two years.

GBP/USD technical analysis

GBP/USD chart by TradingView

The GBP/USD exchange rate has been in a strong downward trend in the past few months. It has recently formed a death cross pattern as the 50-day and 200-day moving averages crossed each other.

The pair has also moved below the lower side of the ascending channel. Also, it has moved to the support at 1.2497, its lowest point in November. Therefore, the path of the least resistance for the pair is bearish, with the next point to watch being at 1.2300, the lowest point in April this year.

The only short-term hope for the pair is that it has formed a small double-bottom pattern at 1.2497 and whose neckline is at 1.2800. That is a sign that it will bounce back soon.

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Politics

Brazilian Real rebounds past 6.1 per USD amid Central Bank interventions

The Brazilian real showed signs of recovery on Friday, rising over 6.1 per US dollar after falling to a record low of 6.29 on December 18.

This comeback is primarily due to strong interventions by the Central Bank of Brazil (BCB), which has sought to support the currency amid continued budgetary uncertainty.

The BCB’s commitment to improving market liquidity reflects a determined effort to relieve real-world pressures and restore investor confidence.

Chart by Trading Economics

Massive liquidity injection by the central bank

In a decisive move, the BCB injected roughly $27.75 billion into the market over the last week, primarily through spot auctions and line operations involving repurchase agreements.

By injecting significant dollar liquidity, the central bank not only relieved some of the immediate pressures on the real but also attempted to stabilize foreign currency rates. This aggressive effort has instilled hope into the market, helping the real to recoup some of its losses.

The central bank’s operations represent a purposeful response to increased volatility and market worry over Brazil’s economic dynamics.

Such efforts are critical to restoring market confidence and establishing a more stable trading environment, and they appear to have helped the currency’s recent strength.

Legislative progress lifts market sentiment

Market sentiment has also improved in response to the Brazilian government’s legislative efforts. According to reports, progress has been made on the fiscal package that is presently being considered by Congress.

Notably, the Senate has authorized a series of budget cuts intended to improve Brazil’s fiscal prospects. Furthermore, recent initiatives have tried to reduce the qualifying criteria for different income distribution programs that provide financial benefits to residents, as well as impose spending limits on public employees.

These initiatives reflect Brazil’s urgent need for fiscal consolidation and demonstrate the government’s commitment to implementing deficit-reduction measures.

Investors have reacted positively to these developments, seeing them as important and opportune initiatives to strengthen the country’s financial stability.

Lingering challenges cloud long-term outlook

Despite the recent rebound in the real economy and the early comfort provided by the government’s fiscal measures, the long-term prognosis remains uncertain.

Analysts warn that, while immediate pressures may have subsided, substantial difficulties remain that might stymie sustained fiscal consolidation.

One of the most significant obstacles is the government’s ability to maintain a cohesive and successful fiscal strategy in a politically sensitive atmosphere.

The fiscal package’s effectiveness will be determined not only by its immediate effects but also by the government’s ability to execute and enforce these policies against opposition from various political factions and interest groups.

Furthermore, broader economic issues such as commodity price variations, global economic trends, and potential external shocks may hinder Brazil’s recovery.

The real remains subject to fluctuations in investor sentiment, which can be influenced by developments in Brazil as well as the global economic situation.

A delicate recovery

The Brazilian real’s comeback above 6.1 per USD marks a watershed moment for the country’s economy, aided by significant central bank policies and legislative efforts to address budgetary issues.

However, as Brazil navigates these tumultuous waters, the path to long-term recovery remains complex and uncertain.

As the BCB continues to monitor the situation and respond to market dynamics, investors will be looking for additional indications about the government’s fiscal strategies and their potential impact on general economic stability.

The following months will be critical in evaluating whether the current recovery is a sign of long-term improvement or only a brief respite in a difficult budgetary situation.

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Politics

Why is Trump threatening additional tariffs on Europe, and is he serious?

Donald Trump, the president-elect of the United States, has issued another warning to the European Union, threatening tariffs if its member states do not increase their purchase of American oil and gas.

The statement, made via Truth Social, signals Trump’s intent to leverage energy exports to address the US-EU trade deficit, a long-standing grievance.

With the US being the world’s largest producer of crude oil and a top exporter of liquefied natural gas (LNG), the threat places significant pressure on the EU to act.

Trump’s hardline stance comes just over a month before his inauguration, during a high-profile visit to Paris for the reopening of the Notre Dame Cathedral, where trade tensions were a key topic of discussion.

EU braces for new US trade measures

European officials, recalling the tumultuous trade policies of Trump’s previous administration, have been preparing for renewed tensions.

In 2017, Trump imposed tariffs on European steel and aluminum, citing national security concerns, catching the bloc by surprise.

Since then, the EU has overhauled its trade doctrine, implementing robust mechanisms to counter coercive practices.

The EU’s recently adopted anti-coercion instrument empowers the European Commission to impose retaliatory tariffs or other punitive measures in response to politically motivated trade restrictions.

This tool is part of a broader strategy to protect the bloc’s interests under challenging trade dynamics.

The foreign subsidies regulation allows the commission to block foreign companies benefiting from unfair state support from participating in public tenders or mergers within the EU.

German Foreign Minister Annalena Baerbock addressed these preparations during a Group of Seven meeting in Italy last month.

She emphasized that Europe is ready to respond decisively if Trump pursues an “America First” approach, reinforcing the bloc’s commitment to unity in the face of external pressure.

US is a major energy supplier to Europe

The US remains a vital energy supplier to Europe, with American LNG accounting for over half of the EU’s gas imports last year.

These imports have been pivotal in reducing the bloc’s reliance on Russian energy following the Ukraine conflict.

However, Trump’s demands for increased purchases highlight the underlying tensions in transatlantic trade relations.

The US has also emerged as a major crude oil exporter, supplying markets across Europe and Asia.

Trump’s rhetoric underscores his administration’s focus on leveraging energy exports as a tool to address trade imbalances.

While Europe is a key destination for American oil and gas, Trump’s tariff threats add a layer of complexity to an already delicate trade partnership.

Trump’s grievances extend beyond energy. He has criticized Europe for insufficient defense spending and the persistent trade deficit with the US.

His approach, which he described as “tough love” during his previous term, signals a likely continuation of confrontational trade policies.

Is Trump serious about this?

The EU faces a critical challenge in navigating its relationship with the incoming US administration.

Trump’s rhetoric, coupled with his past actions, suggests that trade disputes could escalate rapidly if Europe fails to meet his demands.

The bloc’s enhanced trade defenses and unified stance offer some reassurance, but the potential for conflict remains high.

Europe’s response will likely focus on balancing economic interests with geopolitical realities.

As the largest consumer of US LNG, the EU holds significant leverage, but Trump’s readiness to impose tariffs underscores the risks of over-reliance on a single energy partner.

The coming months will reveal whether Trump’s hardline tactics will lead to a deeper transatlantic rift or a renegotiated trade dynamic that benefits both sides.

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Business

GBP/USD forecast: sterling outlook after the BoE, Fed decisions?

The GBP/USD exchange rate dived to its lowest level since May 2024 as the US dollar index surge gained steam. It dropped to a low of 1.2497, much lower than the year-to-date high of 1.3430 after the latest Federal Reserve and Bank of England (BoE) interest rate decisions.

Bank of England interest rate decision

The GBP/USD exchange rate continued falling as the Bank of England delivered a relatively dovish statement on Thursday.

The bank decided to leave interest rates unchanged at 4.75% as it remained concerned about the elevated inflation rate in the country.

Unlike the Fed and the European Central Bank, the BoE has already embraced a more gradual pace to interest rate cuts. It has slashed rates by just 0.50% this year, while the two other banks have cut by about 1%.

Still, there are signs that a more dovish tilt is emerging from the BoE as 3 officials voted to cut rates by 0.25%.

The BoE decision came a day after a report by the Office of National Statistics (ONS) showed that the headline Consumer Price Index (CPI) rose from 2.3% in October to 2.6% in November. Core inflation moved from 3.3% to 3.5%, still higher than the bank’s target of 2.0%.

The Retail Price Index (RPI) rose from 3.4% to 3.6%, while the harmonized inflation rate moved to 3.5%. These numbers meant that the country’s inflation remains stubbornly high and that the bank has room to leave rates unchanged for long.

UK is in a stagflation

The challenge, however, is that the UK is going through a stagflation process. Stagflation is a situation where a country goes through high inflation and slow economic growth. In theory, it is one of the most difficult situations to manage since cutting rates will lead to more growth, but cause inflation. High interest rates, on the other hand, hurt a country’s growth by limiting the economic growth.

Therefore, the GBP/USD pair crashed because analysts expect that the bank will be more dovish in the coming year. Most analysts expect it to cut rates by 55 basis points, while those at ING estimate that it will cut by 150 basis points. In a note, they said:

“The apparent growing dovish front within the MPC in spite of the latest hawkish wage data potentially suggests a greater focus on slowing activity. That reinforces our dovish view on the Bank of England for next year – we expect 150bp of cuts, against market expectations for around 55bp.”

The GBP/USD pair crashed also because of the hawkish Federal Reserve. In a statement, the Fed hinted that they will deliver two rate cuts in 2025, lower than the previous estimation of four. That hawkish tone pushed the US dollar index to the highest level in over two years.

GBP/USD technical analysis

GBP/USD chart by TradingView

The GBP/USD exchange rate has been in a strong downward trend in the past few months. It has recently formed a death cross pattern as the 50-day and 200-day moving averages crossed each other.

The pair has also moved below the lower side of the ascending channel. Also, it has moved to the support at 1.2497, its lowest point in November. Therefore, the path of the least resistance for the pair is bearish, with the next point to watch being at 1.2300, the lowest point in April this year.

The only short-term hope for the pair is that it has formed a small double-bottom pattern at 1.2497 and whose neckline is at 1.2800. That is a sign that it will bounce back soon.

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