EUR is trading poorly - Westpac

Research Team at Westpac, notes that the EUR is trading poorly and the softer IFO, EC surveys and Aug CPI data all encouraging hopes that the ECB can tweak policy next week (8 Sep).

Key Quotes

“Brexit likely sees staff trim 0.2-0.3ppts off 2016/17 GDP, as good a catalyst as any for a policy tweak. A formal 6mth QE extension beyond March 2017 the favoured option. EUR should trade lower into the 8 Sep ECB (target 1.10) but ahead of that US ISM and payrolls may underwhelm (14 of 18 Aug payrolls have missed consensus) delivering better selling levels.

Technical: EUR/USD remains in the central zone of a consolidation range that has been forming since late 2015. The style of the pullback from 1.1365 and a sound turn in daily momentum suggest a slide to retest 1.0940 (61.8% of the broad range) within further range defining rather than an impulsive change in trend.”