Daily Commentary BY THE CURVE TEAM –

Eurozone Slips As We Lead Into a Busy Week

19th of March, 2018

The turbulence we saw over the course of last week looks to have continued as we start the new week. US President Trump continues to capture headlines with another Twitter outburst. While over to Europe, despite the rhetoric coming out of the ECB of late surrounding the pace of monetary policy normalisation, the latest inflation read points to the contrary.

Geopolitics continues to cast a more volatile tone over markets and its no surprise as Donald Trump is front and centre yet again. This time the Deputy Director of the FBI, Andrew McCabe was sacked prior to his retirement while there was another tweet surrounding the necessity of the Mueller probe.

Moving across to Europe and while despite the area showing strong signs of recovery, prices and wages are failing to follow a similar trend. Inflation was up just 1.1% in February, the lowest read since late 2016.

The data looks to imply that the pace at which the ECB normalises monetary policy will be slower than expected. This notion was highlighted by ECB chief economist Peter Praet:

“I would not revise the guidance too early, because that could send wrong signals about the end of our net asset purchases,” Praet said. “I wouldn’t say there is a date or a deadline.”

It is evident that despite a period of stronger growth, there is still a large degree of slack in the Eurozone and until we see conditions tighten, the ECB will not be going anywhere fast.

This brings us to another busy week with the highlight domestically being the RBA minutes tomorrow and employment data on Thursday. Offshore we have the FOMC, BOE and RBNZ meeting to discuss monetary policy while details around Brexit will also capture focus.

Oliver Parsons

Client Relationship Manager