Through most of 2024 and 2025, central bank paths diverged. The European Central Bank moved earlier and more aggressively into a cutting cycle. The Federal Reserve held longer, then eased more cautiously. Heading into the second half of 2026, the policy gap between the two blocs remains material — and so does the gap between corporate treasury policies that have adapted and those that have not.
This is not a macro commentary. It is a working note on what the rate environment means for the structure of corporate treasury — funding, FX, liquidity, and counterparty selection.
Funding cost is no longer uniform
The most direct implication is on funding. Corporates with operations in both jurisdictions face genuinely different costs of capital depending on where the funding is raised. The temptation is to optimize for the cheapest currency. The risk is that the optimization is FX-driven rather than structural.
The relevant questions for treasury are:
- Where are the cash-generative entities? Funding raised against the cash flows that service it carries different risk than funding raised against an FX swap.
- What is the natural currency exposure of the business? Funding that aligns with that exposure is a hedge. Funding that does not is a position.
- Where are credit relationships strongest? Pricing is not only a function of rates — it is a function of the relationship, counterparts, and structure.
FX hedging in a divergent rate environment
Carry has returned to FX. For corporates hedging multi-currency exposure, the cost (or yield) of the hedge has become a material component of total cost — large enough to materially change the answer to the basic hedging question.
An FX hedging policy designed for a zero-rate world will produce the wrong answer in a divergent-rate world.
Hedging policies need to address explicitly: the cost of carry on each currency pair, the horizon of the exposure, whether the hedge is economic or accounting-driven, and the threshold beyond which the corporate is willing to accept open exposure for a cost saving. Most policies we review have not been updated to reflect this.
Liquidity deployment in two currencies
Where rates differ, the natural deployment of liquidity differs. Holding excess USD liquidity in a non-yielding USD account, while running an overdraft on the EUR side, is a structural inefficiency that the rate environment makes increasingly costly.
Group treasury policy should reflect:
- A defined yield benchmark for each material currency.
- A clear framework for inter-currency sweeping where the structure permits.
- Counterparty diversification, especially where deposit yields differ materially across banking partners.
What the next twelve months likely require
We are not in the business of forecasting rates. But for treasury planning, three points are worth holding:
- The policy gap between the Fed and the ECB will likely remain material for the foreseeable horizon. Treasury policy should not assume convergence.
- Forward curves in both blocs price further easing, but with significant uncertainty. Hedging policy should be robust to a range of outcomes — not optimized to a central path.
- The cost of treasury inaction is materially higher now than it was three years ago. The hurdle for revisiting policy is lower than the hurdle for leaving it as it is.
The treasury operating implication
Most of what we have described is policy. But policy is only useful if it can be executed. The treasury operating model — bank connectivity, FX execution, intercompany flows, and reporting — has to be capable of acting on the policy in close to real time. The corporates that are best positioned for the current environment are those that have closed the gap between treasury policy and treasury execution. The corporates that are most exposed are those that have updated one without the other.
The rate environment will continue to shift. The question is whether the treasury operating framework is built to respond, or built to wait.
This insight reflects general analysis and observations from Firma Advisory's work in treasury, banking, and cross-border financial advisory. It does not constitute investment advice, financial advice, or a recommendation in respect of any specific security, transaction, or financial decision. For analysis specific to your organization, contact us at contact@firmaadvisory.com.