Tim Riddell, Research Analyst at Westpac, points out that the continued pullback in Eurozone activity since early 2018 is now being acknowledged by ECB and EU officials as more sustained than an interim adjustment to the strength seen in 2017.
Key Quotes
“Core inflation may be stable, but it persistently fails to display any upside pressures, despite expectations from ECB for this to develop. 2019 may now revert to the low trend growth and inflation that were evident prior to 2017.”
“Uncertainty over national budgets and Brexit and the turn of focus towards EU elections in 2019 are likely to underscore the need for the ECB to maintain its extended guidance after its APP ceases in December. A sharp lift in the likes of IFO, PMIs and CPI are needed to alter this near term profile.”
“EUR/USD rebounds are unlikely to persist. This suggests selling squeezes towards 1.16 for a fall back to 1.12 with stops above 1.17.”
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