EUR solid despite moderating hard data, surveys and positioning - Westpac

According to Tim Riddell, Research Analyst at Westpac, moderation in hard and survey data of Eurozone, as well as reduced leveraged positioning since early 2018 have failed to impact EUR, especially when viewed on a trade weighted basis.

Key Quotes

“Hard activity data next week is predominantly “known” due to national releases and so the key driver of EUR may be geopolitics, though, a deeper pullback in ZEW expectations might have an impact on EUR’s current strength.”

“Despite moderating, data still suggest solid Eurozone growth in H1 18 and ECB officials, notably Nowotny, have highlighted potential for early policy guidance. A subtle shift has developed this week as officials included downside growth and inflation risks if trade tensions were to escalate. This has occurred as EUR/USD has again approached 1.24, a level that previously prompted ECB members to cite FX risks. Italian coalition talks are taking a back seat to geopolitics and the latter is likely to be the key risk factor over the coming week.”