ECB: A tough summer ahead – Nordea Markets

Sandeep Kanihama FXStreet Contributor

Analysts at Nordea Markets suggest that as the distorted supply side keeps pushing up oil prices, the ECB could face an interesting summer in terms of inflationary trends in the Euro area.

Key Quotes

“While core inflation of 0.7% in April was confirmed in the final print, we consider the details revealed in the final release as rather hawkish. And with headline inflation bound to pick up until July (maybe even close to 2%) due to energy price effects, the ECB could end up in a scenario when it will have to hike the HICP inflation forecast higher, while leaving the outlook for core inflation more or less unchanged and still ultimately try to sound dovish.”

“A difficult communication task that involves a higher risk of a more hawkish market interpretation than the ECB intends. In late 2016 when the ECB last faced headline inflation close to 2%, the market reaction was almost non-existent. But given that the Euro area output gap has moved closer to positive territory since then, it may not be the case this time around.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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