Eurozone growth will exceed official forecasts in H2 17 - Westpac

According to Tim Riddell, Research Analyst at Westpac, even though inflation pressures are likely to remain benign, continued firm survey data suggests that EZ growth will exceed official forecasts in H2 17 and so further pressure ECB towards an early tapering of QE.

Key Quotes

“Draghi has suggested that this will not feature in his Jackson Hole speech, but we continue to expect a hint of change in policy into 2018. Given the increased long positioning in EUR, there could be an unwind risk if Draghi proves to be more neutral, but positive underlying pressures will remain and so markets are likely to continue to debate when the guidance shift will occur.”

“Asset manager EUR net longs are at a record high though leveraged funds are only slightly long, so the scale of risks of EUR unwinds on a US data rebound is debatable. However, the underlying momentum in EZ data continues to suggest support for EUR on any such pullbacks.”