ECB dislikes tighter conditions, though euro risks are more balanced

Head of Global Economics at ANZ, Brian Martin explains that they’re actually assured that the European Central Bank will be quite slow when it comes to changing policy direction, especially considering an absence of underlying inflation as well as wage pressures.

As for other risk premia in the euro area, they turn to be diminishing which are ensuring some underpinning to the common currency amid disappointment with Donald Trump’s policy implementation.

The risk of a further upward shrink in the common currency can’t be ruled out, although policy makers are reluctant to face an ongoing FX-led tightening in monetary conditions.

As a result, for the common currency there’re several positives in diminishing risk premia. Well, in the short run, versus a backdrop of gloomy mood over American policy implementation, these could give the euro some further upside impetus. By the way, interest rates were last decreased over a year ago, and the EU economy has managed to expand with evident signs that the upswing’s actually broadening.

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