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Analysts at Nomura suggest that under the new forward guidance introduced in June, EUR and EUR yields are again less sensitive to economic data.

Key Quotes

“In the short term, EUR should remain less sensitive to economic data, but recent communications by ECB officials suggest a medium-term EUR appreciation trend is likely to resume into year-end.”

“In the short term, calendar-based guidance is still valid and Italy’s politics will be also major uncertainty for the EUR outlook. However, redenomination risks of EUR remain historically low and foreign investors can just shift away from BTPs into other EGBs without much of an FX impact. Thus, as we avoid an escalation in Italy’s political uncertainty, we expect EUR to trade strongly gradually and ECB officials’ communications to suggest that a return to “data-dependant” stance will support EUR appreciation. In terms of data, wages are crucial.”