Eurozone: Recovery to strengthen in 2016 – Danske Bank

FXStreet (Delhi) – Research Team at Danske Bank, suggests that growth in the euro area slowed marginally to 0.3% q/q in Q3, down from 0.4% q/q in Q2, but the latest survey indicators point to stronger growth in Q4 and we look for the recovery to strengthen in 2016 on the back of a turn in the global inventory cycle.

Key Quotes

“ECB’s ‘menu’ of monetary policy easing in December disappointed our expectations and those of the market but, nevertheless, we believe it marked the end of easing from the ECB. In the near term, base effects should lift inflation to around 1.0% as early as January, while the economic data should confirm the ECB’s small upward revision to its projections for activity. Later on, the quickly declining unemployment rate should receive more attention, as it will eventually put upward pressure on wages and core inflation.”

“A key risk to our call for ‘the end of ECB easing’ is that Draghi will eventually be forced to lower the core inflation forecast, which, in our view, is still too optimistic. Related to this, the ECB will be challenged by EUR appreciation pressure (which we continue to look for) and the negative impact on inflation.”