ECB: Patient, prudent and persistent policy stance - Westpac

Markets now expect Draghi and Praet to show no sense of haste and to stress their patient, prudent and persistent policy stance while keeping open the potential for guidance change into H2 18, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

 “Eurozone data and surveys continue to moderate while inflation pressures remain benign. IFO and ZEW expectations have led the turn in data. EZ and GE retail sales are also moderating and their simple six month averages peaked into 2018. Markets currently assume that data softness was related to poor weather and a cooling after gains in late 2017 deemed unsustainable. However, any further slippage in retail sales data into Q2 18 could become another inflation headwind and reduce ECB’s need to act swiftly.”

“EUR strength was again cited as a risk to ECB forecasts when EUR/USD neared 1.25. If USD rebounds are sustained and EZ inflation remains benign, EUR/USD may well retrace below 1.20.”