ECB guidance change coming? - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that consistently strong activity data have led markets to expect ECB guidance change on the 8th June.

Key Quotes

“Despite both Draghi and Praet stating that any change will be gradual and cautious, Buba Pres. Weidmann, among others, has stressed the need to withdraw accommodation. Although soft May inflation suggests a lack of upside pressures, a change has been priced into markets, especially EUR.”

“Political risk may be reduced, but after French Assembly (11th and 18th) and Italian local elections (11th and 25th) markets will turn attention to the risks around German, Austrian and potential Italian elections (late-3Q /early-4Q).”

“EUR strength may persist into the ECB meeting, but is increasingly vulnerable to sharp set-backs if ECB change is limited.”