Viraj Patel, Research Analyst at ING, suggests that after the disappointment of seeing Eurozone core inflation remain stuck below the 1.0% region, policymakers will be looking for some solace in today’s leading indicators for the economy.
“Recent surveys have pointed to buoyant consumer and business sentiment, which suggests that the prospect of tighter ECB policy is not actively weighing on domestic animal spirits. This week’s minutes for the Dec ECB policy meeting (Thu) may show signs of hawkish dissent – with some officials favouring an explicit end to the ECB’s QE bond-buying programme later this year. Yet, with EUR/USD holding ground above 1.20, we think this story may already be priced in – and the guessing game over the ECB’s next move serves a useful purpose in keeping EUR upside contained for now. While we see no major catalyst for a move below 1.20, a positioning adjustment could fuel a correction down towards 1.1910/30. Our preferred tact would be to buy this EUR/USD dip.”
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