- The dovish shift in expectations for ECB policy and interest rates continues apace.
- Soft PMIs will add to the conviction in markets that an accelerated easing cycle is underway…
- …But next week’s calendar will likely be more challenging for dovish EZ rate expectations.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Italy’s MTFS plan suggests it is doing everything right, complying with new EU rules in quick order…
- ...This is because Rome is assuming potential growth of almost 1%, a dream scenario for Italy…
- ...What’s more, this year’s budget will be bigger than Rome thinks, making 2025 more difficult.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EURUSD won’t make it to 1.15 by year-end, but we still think it will get there, eventually, in H1 2025.
- Our inflation, interest rate and GDP forecasts signal upside risks for EURUSD from its current level…
- …But the trend in political uncertainty points to downside risk to this call.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Construction went back into recession in Q3.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: An inevitable correction; further softness ahead.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- The ECB's Bank Lending Survey points to looser lending standards and rising demand for credit...
- ...supporting our view that growth in investment and household consumption will turn a corner soon.
- Nowcast models for Q3 GDP point to downside risks to growth; we think they're misleadingly negative.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Growth indicators are rising in importance for policymakers.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: The first big win for ECB doves in a long time.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: EZ trade balance pulled lower by rising imports, again.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: The trump card ECB doves need for a third rate cut today.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- ECB doves claimed a big victory yesterday, but we doubt this is the start of a much quicker easing cycle.
- The central bank is now more focused on downside risks to growth; all eyes on growth data in Q4.
- EZ inflation fell sharply in September, but it will rebound soon; core inflation is set to dip in Q4.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: EZ industry escaped recession in Q3; investor sentiment rises again, modestly.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- We still think French GDP rose solidly in Q3, despite hard data pointing to downside risks.
- Government spending in France is set to slow sharply next year, but the hit to GDP should be minor.
- We now see GDP in France growing by 1.0% in 2025, 0.3pp below our previous forecast.
Claus Vistesen (Chief Eurozone Economist)Eurozone
- EZ car production remains well below pre-pandemic levels and is still facing headwinds…
- ...Demand is subdued, and new emissions standards come into effect in 2025.
- The sector will stay on the back foot without a push to innovate, most notably to develop cheaper EVs.
Melanie Debono (Senior Eurozone Economist)Eurozone
- EZ corporate profit margins are falling rapidly, underpinning continued ECB policy easing.
- A decline in work-hours since Covid partly explains labour-hoarding in the Eurozone…
- …But fears of labour shortages when the cycle rebounds and no recession are likely bigger drivers.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Inflation will likely rise back up in Q4.
Melanie Debono (Senior Eurozone Economist)Eurozone
- We look for a third rate cut from the ECB this week, taking the deposit rate to 3.25%.
- The consensus and market-based expectations for rates next year are too low…
- …They will move higher once the ECB broaches the subject of the neutral rate.
Claus Vistesen (Chief Eurozone Economist)Eurozone
In one line: Still on track for a sixth straight quarterly fall in Q3.
Melanie Debono (Senior Eurozone Economist)Eurozone
In one line: Is the German consumer finally waking up?
Claus Vistesen (Chief Eurozone Economist)Eurozone
- Italian business surveys soured in Q3, but our Nowcast models point to a pick-up in GDP growth.
- Destatis finally published German retail sales data after a four-month hiatus…
- ...They were positive, as we suspected, so we have again removed a German recession from our call.
Claus Vistesen (Chief Eurozone Economist)Eurozone
