ECB: Increasing uncertainties - Westpac

ECB comments at the Sintra CB forum and elsewhere have underscored their rationale for ending APP and their extended forward guidance, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“Updated projections from both ECB and Bundesbank indicate that headline CPIs will be benign through their forecast period, despite higher fuel prices and steady wage growth. ECB concerns over increased uncertainties due to trade tensions and EU political risks explain their forward guidance.”

“Additionally, faltering PMIs, sliding ZEW expectations and declining capital goods orders suggest that recent soft activity could extend into H2 18. Following flash PMIs, next week’s IFO and CPI data will be key.”

“The increased political tension within EU means that the Leaders’ Summit is also of increasing importance. It will now primarily focus on migration. Reform and EU’s budget also remain key issues.”

“All aspects are likely to weigh on EUR into the summit. Rebounds should be limited within a perceived 1.12-1.19 range.”