EUR: Solid growth - Westpac

ZEW & PMI surveys are finally moderating, but still suggest very solid 1Q growth, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“CPI will be critical in the run up to the ECB (8th) meeting and its updated staff projections. Although markets are geared for a shift in guidance, which will increase on a flicker of inflation or wage growth, underemployment is still apparent, highlighting continued labour slack across the region. Therefore markets may well be disappointed.”

“Draghi has repeatedly stated that resolving NPL’s is critical for sustainable EZ growth. This week the Italian Banking Association (ABI) reported a notable fall in Italian NPL’s in 2017. This may be an early sign of longer term underpinning for EZ growth and EUR.”

“Markets seem calm about the SPD coalition vote and Italian election. However, position adjustment is likely, especially if Italian politics become uncertain, into the events.”

“Though USD may be the near term driver of EUR/USD, EUR is strongly supported.”