EUR/USD on the cusp? - Westpac

Analysts at Westpac argue that the greater part of Eurozone data underperformance, both in outright terms and relative to the US, is mostly in the rearview mirror.

Key Quotes:

"Key event risk later this week – the ECB meeting (April 26) and Q1 US employment cost index and advance GDP (April 27) - will likely prove decisive in whether EUR/USD breaks down through key four-month range support, c. 1.2150-1.2200."

"It’s not clear that the “soft patch” will prompt the ECB will fundamentally alter course."

"For one, pre-meeting comments from ECB officials do not suggest a material change of stance is on the table. This week’s meeting does not have the same profile as quarter-end meetings where staff projections are updated either."

"Draghi will surely reiterate the risks from a high euro, that inflation is not yet self sustaining and that recent soft data reaffirm the need for “persistence and patience”."

"But, these comments hardly constitute a meaningful dovish lurch and will be well discounted. Meanwhile, core Eurozone inflation is gradually creeping higher and unemployment continues to trend lower."