Tim Riddell, research analyst at Westpac, explains that the latest round of national and Eurozone PMIs and inflation reports, as well as several national industrial production releases, indicate that the moderation in both growth and inflation across the region are more structural than ECB had anticipated.

Key Quotes

“This will heighten attention on the ECB’s staff projections, which have increased importance in December, and discussions over policy measures given the end of APP. The release of German and Eurozone Ind. Prod. and the latest ZEW survey are timely, just in advance of the ECB General Council meeting.”

“National budgets that threaten the EU guidance on deficits need to be renegotiated into 19th Dec. Italy’s budget amendments appear to be making sufficient amendments to avoid EU sanctioning but France is reeling back fiscal policies that may now cause it to infringe budget guidance. ECB’s could extend its forward guidance even further and, given budget concerns, EUR/USD rebounds should struggle, risking a slide to 1.12.”

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