Eurozone: Stabilization - Westpac

According to Richard Franulovich, Head of FX Strategy at Westpac, Eurozone Q2 GDP encouragingly revised up to 0.4% from 0.3%, pointing to stabilisation rather than ongoing deceleration, while the expectations sub-index of the German Aug ZEW showed a notable recovery, from six year lows of -24.7 last month to -13.7.

Key Quotes

“The recent “truce” in EU-US trade tensions may be already bearing fruit, though August prelim manufacturing PMIs due next week will provide a more definitive signal.”

“Despite that the ECB is unlikely to return from summer break (Sep 13) and declare that risks have abated; after all EM risks have been rising and US-China trade tensions remain a major potential flash point. Draghi should underscore the need for continued “ample degree of accommodation”.”

“Italian debt sustainability to return as a market focus in September too, the populist government to flesh out details of their contentious 2019 budget that will likely draw the ire of both ratings agencies and the EU.”

“EUR/USD trades poorly and likely continues to struggle amid the superior US growth and rate attractions.”