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Eurozone

Global Macro Comment — US and China step away from the brink; rate cuts in July (Fed), September (ECB)

At the G20 summit, Xi Jinping and Donald Trump stepped away from the brink and agreed on a temporary, but argua-bly fragile, trade truce. We have had rate cuts from the Fed next year in our forecasts for some time, but we now ex-pected to see them sooner. Despite it likely being a close call, we expect the Fed to cut its interest rate by 25bp in July and to deliver a cumulative 75bp of cuts early next year. We expect the ECB to adjust forward guidance in July, cut rates in September by 10bp and likely introduce quantitative easing thereafter.

Erik Meyersson, Senior Economist | erme03@handelsbanken.se

EMU Comment — Euro area inflation expectedly flat at 1.2%, driven by services

  1. Eurozone inflation as expect flat at 1.2%, driven by services
  2. France and Italy illustrate diverging inflation outlooks within the eurozone
  3. Focus on upcoming G-20 meeting

Erik Meyersson, Senior Economist | erme03@handelsbanken.se

EMU Comment — ECB in mild dovish shift, with TLTRO III less generous than last round

  1. ECB in mild dovish shift, with TLTRO III less generous than last round
  2. Draghi warns eurozone risks tilted to the downside; tiering unlikely without further guidance changes
  3. Inflation outlook pressures an ECB expecting extensive personnel changes

Erik Meyersson, Senior Economist | erme03@handelsbanken.se

EMU Comment — Euro area inflation drops to 1.2 percent, largely driven by core, services inflation

  1. The flash annual consumer price index y-o-y was 1.2 percent in May, core inflation 0.8 percent
  2. Unemployment falls to 7.7 percent in April
  3. Expect rates on hold, updated forecasts and TLTRO details ahead of Thursday's ECB meeting

Erik Meyersson, Senior Economist | erme03@handelsbanken.se

EMU Comment — Euro Area and Germany still weighed down by manufacturing, six-month highs in France

  1. Eurozone Composite PMI nudges up slightly to 51.6
  2. No expected uptick in subdued German Manufacturing PMI, France boosted by services

Erik Meyersson, Senior Economist | erme03@handelsbanken.se

Macro Comment Eurozone — European Parliament elections: A battle for the future of Europe

This month's upcoming elections to the European Parliament are set to be particularly important, given the timing of selection processes for key EU leadership positions. In line with improving economic conditions, trust in EU institutions has improved. Although anti-establishment parties are likely to boost their support, riding on anti-incumbent sentiment over immigration policies and pocketbook economics, the probability of translating this into policy shifts within the EU is relatively low. Differences in populist parties' ideological as well as policy preferences are likely to raise barriers to a cohesive eurosceptic bloc. More likely is a coalition including either the greens or the liberals, which if anything ought to result in more EU integration rather than less. Yet the coming bargaining process as the ruling coalition in the European Parliament moves from two to more parties still carries risks, and our view is that this factor will offset the relief of populists failing to gain significant power, with an expected net neutral market impact overall.

Erik Meyersson, Senior Economist | erme03@handelsbanken.se