In view of Tim Riddell, senior market strategist at Westpac, there are deeper depressing factors at play across the Eurozone, in addition to the recent sharp pullback in industrial production in Eurozone, which may have been impacted by the slow-down in German auto production due emission scandals.
“The weakness in German factory orders and capital goods exports with other Eurozone countries underscores the continuing softness in regional activity into 2019. This is in sharp contrast to the outsized growth seen in late 2017. ZEW expectations do appear to be bottoming out, but remain at low levels and, given their lead factor, still suggest that activity should remain low.”
“Recent comments from ECB members, notably including Draghi, highlighted lower growth than expected and the lack of inflation pressures in the region with core CPI stuck at 1.0%. Their conclusion remains that ECB stimulus needs to be sustained and so their extended forward guidance will likely be underscored on 24th.”
“Rebounds in EUR/USD are likely to define range resistance in the 1.15-1.16 area with bias for further slippage towards 1.12 support.”
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