Eurozone: Pronounced weakening of data evident into Q1 19 - Westpac

According to Tim Riddell, senior market strategist at Westpac, in the Eurozone, pronounced weakening of data has been evident into Q1 19 and highlights the problems that ECB now face after they called a halt to their APP/QE at the end of 2018.

Key Quotes

“Markets have been discussing the likelihood of ECB renewing TLROs/LTROs at its 7 March Governing Council meeting when it receives updates to staff forecasts.”

“The slide in EUR/USD from its early February tests of 1.15 have reflected the weakening of regional data and has brought EUR to the bottom of its recent ranges. At the same time, Westpac’s Eurozone data pulse and positive surprise indices have actually shown potential to rebound.”

“The region faces further problems during H1 19 as political tensions start to build (snap Spanish elections, Brexit, French social unrest, Italian politics) in front of the May EU parliamentary vote.”

“After EUR’s recent slide, any data improvements, given negative expectations, could give rise to a squeeze through its recent range. However, such rebounds are likely to be short-lived.”