Eurozone: Sound growth likely in H1 18 - Westpac

April PMIs held in relatively firmly and still imply sound growth for Eurozone in H1 18, however the tone of the reports has turned decidedly less confident, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“Core inflation is failing to show any upside pressures while slack is clearly still weighing on the labour market, with headline unemployment in the Eurozone remaining at 8.5% and youth unemployment above 17%. The ECB also underscored their more cautious tone.”

“Germany’s coalition (Merkel is materially less powerful) is showing little appetite for structural reform, Italian coalition talks are stumbling towards new elections while Macron faces industrial action over his reforms. Therefore the ECB remains the key growth support at a time when financial conditions have been tightening.”

“Softening data and ECB caution coincide with a rebounding USD to drive EUR/USD sub-1.20 in a move that could continue towards 1.15-1.17.”