Tim Riddell, Research Analyst at Westpac, suggests that ECB’s policy meetings are always of interest as they provide insight to the Governing Council’s thought process.
“The apparent easing of trade tensions is a positive for the region, but is merely likely to alleviate risks rather than subdue medium term concerns over the moderation of EU growth in 2018 and the rise of internal political dissent.”
“That dissent is likely to resurface in September. Inflation remains benign and forward looking surveys suggest that moderation is set to continue in 2H’18. Benign inflation partly reflects a lack of retail demand in Germany, despite solid confidence and so ECB should remain unchanged in its guidance.”
“Trump’s apparent shift should alter near term risk sentiment and the potential for interim position squeezes, favouring EUR rebounds. Nevertheless, the difference in rate projections, given the ECB’s extended guidance, should cap EUR/USD rebounds and underscore resistance around 1.19.”