EUR strength should continue - Westpac

Draghi’s lack of policy comments in Jackson Hole removed a hurdle to EUR strength, which should continue now that ECB has begun its silence period prior to their 7th Sep meeting, according to Tim Riddell, Research Analyst at Westpac.

Key Quotes

“Survey data have persistently beaten estimates and market opinion is now for tapering to be debated in Sep. However, its announcement may be delayed until the October meeting (post German elections) given low wage pressures and contained inflation. Sliding populism favours Merkel’s CDU/CSU in Germany’s 24th Sep election. Although a Grand Coalition with Schulz’s SDP is still a distinct possibility, reduced political risk is also lifting EUR, as USD’s Trump effect is more than unwound.”

“Position complacency is becoming a clear risk for EUR, but setbacks should be limited unless there is a clear shift in opinion towards USD.”

“N. Korean tensions lifted CHF, but EUR/CHF would probably need to slide below 1.10 to induce any SNB reaction.”