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ECB intended easing confirmed - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 13, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Guatemala) - Peter Vanden Houte, analyst at ING noted that according to Eurostat’s flash estimate Eurozone GDP expanded by 0.3% in the third quarter, below the 0.4% consensus estimate.

    Key Quotes:

    "Year-on-year growth came out at 1.6%.
    On a country-by-country basis, Spain was again leader of the pack amongst the bigger countries with 0.8% quarter-on-quarter growth. France and Germany grew by 0.3%, Italy and Belgium saw a 0.2% expansion, while the Netherlands and Portugal disappointed with only 0.1% and 0% growth respectively. Greece experienced a 0.5% contraction, while in Finland GDP even fell by 0.6%.

    While the GDP components haven’t been published yet, it is fair to say that consumers probably saved the day for the Eurozone economy in the third quarter. Both the renewed fall in energy prices and the declining unemployment rate have likely boosted disposable income, supporting consumption, in our view the single most important driver of the expansion at this moment. While we don’t expect a sudden spike in oil prices anytime soon, the boost from the recent fall in energy prices will gradually peter out over the coming quarters.
    At the same time exports are currently facing headwinds on the back of the growth slowdown in the emerging markets. This is already reflected in the tanking confidence and production in the manufacturing sector, a factor that might also depress business investment in the short run. On the other hand, rising house prices, increasing consumer confidence and easy financing condition is likely to give the construction sector a boost in the coming quarters.

    Bottom line: the Eurozone recovery is continuing, but it seems like driving with the handbrake on. With the emerging countries still in the doldrums, little acceleration is to be expected in the coming quarters. Whether today’s figures will be the final piece of data to push the ECB into more easing is perhaps the wrong question to ask. We believe that the ECB has actually already made up its mind and that today’s figures are not strong enough to deter them from going ahead with the intended easing. We expect a 10 Bp rate cut in the deposit facility rate, a 5 Bp cut in the refi rate and a moderate increase in the monthly asset purchases (+ €5 to €10 Bn), necessitating a broadening of eligible assets to regional debt."
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