ECB need to provide a steadying hand – Westpac

Tim Riddell, Research Analyst at Westpac, suggests that despite some respite, concerns over Italian banks (notably NPLs) and politics remain high.

Key Quotes

“Uncertainty over what will result from either a “Yes” or “No” vote from Italy’s referendum means that ECB need to provide a steadying hand.”

“Another swing to the right in Austria could increase EU’s existential issues. Though largely sidelined by markets, which are focused on Italy, this could impact EUR.”

“OECD forecasts this week underlined low Eurozone growth. Draghi repeated that Eurozone growth is being supported by ECB with no alternative policy to assist in procuring self-sustaining growth.”

“Such a backdrop should see ECB extend their policy and SNB maintain its NIRP, in stark contrast to the expansionary shift in US. A positive surprise from Italy may provide a reprieve from EUR’s downside bias, but both EUR and CHF still look set to test extremes of the past 18 months.”