EUR: Cruising for a bruising - ING
|"As our economists note, the US data highlight will be 3Q GDP, with another strong outcome looking likely," note ING analysts.
Key quotes
"Consumer spending continues to be supported by massive tax cuts and a robust jobs market, whilst healthy corporate profitability and a positive economic outlook are encouraging investment. Net trade is likely to swing back sharply after providing huge support to growth in 2Q, but this will at least be partially offset be some rebuilding of inventories. As such, we look for US growth to come in at an annualised 3.6% rate versus the 3.2% consensus and the 4.2% outcome from 2Q18."
"This should keep US rates firm and the market continuing to guess where the top is for the Fed Funds cycle. Higher US rates are also making hedging USD forward exceptionally expensive for European corporates and probably seeing lower USD hedge ratios than would otherwise have been the case."
"For the Euro, the week ahead will largely be about the Italian budget and the ECB. On the former, expect further dialogue between Brussels and Rome through the week, although it seems unlikely Italian politicians are prepared to back down from manifesto pledges. Moody's could be downgrading the Italian sovereign anytime now (currently rated Baa2 on a negative watch). But the main event here will be whether S&P ratings merely switch their outlook from stable to negative or opt for a surprise downgrade next Friday (26th) which we don't think is priced in. On the ECB, our team think the press conference could be a little more dovish, bit not alter the core view that QE is ending in December. And in fact, we're more worried by signs that the US:EU trade detente is coming to an end. US tariffs on European car imports is certainly not priced into the EUR and any indication that President Trump is losing patience with the EU would be greeted poorly."
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