ECB unlikely to alter policy guidance - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that ECB’s extended policy guidance is firmly embedded in markets and unlikely to alter at their 13th Sept meeting.

Key Quotes

“Surveys have shown signs of stabilising, so PMIs and IFO are of interest along with potential of any lift in serially benign inflation pressures.”

“However, as EU politicians and markets return from their summer recess, the key issue will be just how unsettling the details of Italy’s populist coalition budget will be.”

“This week’s delay by Moody’s of their Italian bond rating review until they have greater insight on the budget allowed for a pullback in the BTP-Bund spread and assisted a rebound in the beleaguered EUR (along with US political issues) but risks clearly remain.”

“Recent EUR weakness managed to hold its TWI lows of this year. EUR/USD entered the lower bounds of an anticipated retracement range (1.12-1.19) but current rebounds are likely remain contained within this range.”