Europe: Sentiment is very positive - Westpac

Analysts at Westpac points out that Front and centre this month have been celebrations over France’s election of centrist Emmanuel Macron to the Presidency and a belief that his new party En Marche! could become a fresh force for positive change in the Assembly which has resulted in the positive sentiment across the Europe.

Key Quotes

“It is not anticipated that Macron’s new party will have a majority. Rather that it will instead bring together a coalition to work with a proactive Prime Minister on reform. Given the particularly poor state of their labour market, recent growth outcomes for France have been encouraging. However, there is a question over the importance of credit to this growth cycle. More broadly on growth, back-to-back gains for the Euro Area at a 2% annualised pace have certainly given the market confidence that an end to alternative easing in the region is in sight. Though we argue that, with core inflation well away from target, the market has got ahead of itself.”

“From its current level of 1.10, we expect EURUSD to lose altitude through the remainder of 2017 to 1.05 as Euro Area monetary policy: (1) remains an outright expansionary force through the year and into 2018; and (2) any expectations of materially higher interest rates for the region before 2019 are priced out. Parity or thereabouts for the Euro is forecast for the end of 2018.”