Eurozone: Economy driven by politics and data - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that confirmation of the lack of an uptrend in Eurozone’s core inflation vindicated the ECB’s accommodative stance in the face of continued positive surveys.

Key Quotes

“This week’s report from Germany’s “five wise men” outlining growth rivalling that of post WW II and reunified Germany but also warned that if this is to continue it needs fiscal-led investment. A Merkel-led CDU/Green/FDP coalition would be a positive for EU. However, talks are proving to be difficult due to conflicting core policies between the Greens and pro-business FDP. The thorny issue of immigration could surprise markets by undermining the “Jamaica” coalition talks.”

“Germany’s IP miss this week and warnings of moderation in some surveys, hailing from services, notably in tourism, raise the risk of plateauing growth in 2018.”

“Eurozone survey strength has largely been priced in and so the ECB relative accommodative should cap EUR. Any surprise political cracks could see it slip through its recent range.”