EUR: Real data to hold up into the holiday season? - Westpac

Eurozone surveys keep punching higher, but critical for sustaining EUR’s firmness in the face of yield spreads moving against it is whether real data and especially retail activity hold up into the holiday season, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“Although the ECB (and SNB) do not meet for two weeks, the rhetoric from ECB remains consistent. Unless there is material pickup in inflation (and wage) trends, they will maintain their policies through the bulk of 2018.”

“The longer it takes to confirm a German government the more it will maintain the ECB’s stance. A minority Merkel gov’t might appear status quo, but will severely impair the ability of Merkel to maintain her profile as EU’s de facto leader and implement any substantive reforms.”

“Despite the deeper yield discounts vs USD, their impact has remained limited, but if US reforms advance, they could become the main driver of EUR/USD.”