EU economy: Strength broadening from core - Westpac

ECB is preparing the ground for change and although the risk is that markets are overly primed for change, the dynamics are in place, feels the research team at Westpac.

Key Quotes

“Activity data are now more clearly reflecting the persistent strength seen in sentiment surveys and is now being priced into markets.”

“An absence of internal crises, favourable EU elections results, Merkel polling strongly, and solid global growth are reducing downside risks.”

“The speeches given around the ECB’s annual conference in Sintra have increased expectations for the commencement of withdrawal from the ECB’s extreme accommodation.”

“Draghi’s speech at Jackson Hole in August is expected to be pivotal.”

“However, continued labour markets slack could disappoint markets. ECB is likely to adhere to its previous gradual and cautious change in guidance before its APP and then NIRP are altered.”