Euro zone growth slows to 0.1% as ECB faces energy risks

Euro‑zone GDP slowed to 0.1% quarter-on-quarter in Q1 (preliminary Eurostat), underscoring a fragile growth backdrop as energy‑driven inflation rises. The combination of weak activity and higher energy costs complicates the ECB’s policy trade‑off and has markets pricing in three to four rate hikes over the coming year. That mix is negative for the euro and risk assets tied to European growth, prompting trading ideas to short EUR (EURUSD) and to underweight Eurozone banks/financials amid tighter credit conditions. Key market risks include a rapid easing of the energy shock, which could allow the ECB to pause or cut, and a stabilization in credit that would support bank equities. Overall, the piece signals downside pressure for Europe‑focused indices and the euro while increasing volatility around ECB decisions.