Eurozone: Strong activity into Q4 - Westpac

Eurozone surveys continue to imply strong activity into Q4 but media citing ECB “sources” suggest that tapering technicalities are still to be decided upon, explains Tim Riddell, Research Analyst at Westpac.

Key Quotes

“This reflects Draghi’s comments that agreement may not be completed before December. References to EUR strength hampering these discussions suggest that further EUR/USD gains (whether on the back of on a less hawkish Fed or EZ activity) could dictate whether tapering might be more dovish than currently anticipated.”

“Germany’s election appears ever more likely to return a Merkel led CDU/CSU coalition (grand or otherwise). Market impact should be limited, but comments from Schaeuble could see fiscal easing and so lift ECB expectations.”

“SNB’s NIRP will remain until ECB policy change is confirmed, as CHF is still seen as overvalued and data remains weak.”

“EUR/USD could extend losses to 1.16- 1.17 but EZ economic outperformance should limit the decline.”