The EU summit from Thursday to Friday may be the most important thing this week as the EU leaders will gather to discuss a lot of controversial issues such as migration, trade war, Brexit and the EU’s long-term budget, according to analysts at Nordea Markets.
Key Quotes
“For a while, “completing the Banking Union” was expected to be the hottest topic at the summit, but as time has moved closer, it has become evident that a summit resulting in noticeable reforms is unrealistic.”
“Still, the summit could prove to be somewhat of a market mover as a weak final message from the EU leaders would add fuel to the lately de-integrating sentiment in the Euro area after the Italian worries. Thus, the EU summit risks spell more trouble for the EUR and widen the intra-Euro-area bond spreads.”
“On the data front, it is the big inflation day on Friday as both Euro-area and US Core PCE Prices (Fed’s preferred inflation gauge) are released. Although both numbers may attract less attention than usual due to the ECB’s and Fed’s recently changed communication of respectively the net asset purchase programme and the number of hikes expected in 2018, the numbers could add to the story of diverging inflation and central banks. Thus, we do not expect to see any acceleration in Euro-area core inflation while US inflation will remain close to target. Our EUR/USD view over the summer is currently pretty simple. Diverging inflation outlooks mean diverging central bank outlooks and lower EUR/USD.”
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