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9 Jan 2015
Cheap oil and weaker euro fail to lift sentiment – ING
FXStreet (Barcelona) - Teunis Brosens of ING notes that December’s European business and consumer surveys were disappointing with the weaker euro and cheap oil having failed to improve sentiments, further anticipating ECB to announce QE in two-weeks time in lieu of the weak recovery.
Key Quotes
“December’s European Commission (EC) business and consumer survey was a bit of a disappointment: headline sentiment remained unchanged compared with November. Against expectations, sentiment has not yet benefited from the steep fall in the oil price and the weaker euro.”
“The disappointment mainly stems from the industry sector, where sentiment worsened from -4.3 to -5.2. Industrial export order books have not yet taken advantage of the weakened euro.”
“This is less surprising than it looks: while the euro has given substantial ground against the dollar, it has fallen by only 7% in trade-weighted terms since the peak in March 2014. Importantly for the ECB, manufacturers sharply reduced their selling price expectations.”
“Eurozone sentiment at 100.7 in the fourth quarter is consistent with quarterly GDP growth of about 0.2%. Looking ahead, cheaper oil and the continuing weakening of the euro should start to feed through more positively in January sentiment. However, the return of Grexit fears may offset this.”
“In any case, we think that the feeble recovery and the deflationary tendency that is slowly but surely taking hold are sufficient reasons for the ECB to announce QE in two weeks’ time.”
Key Quotes
“December’s European Commission (EC) business and consumer survey was a bit of a disappointment: headline sentiment remained unchanged compared with November. Against expectations, sentiment has not yet benefited from the steep fall in the oil price and the weaker euro.”
“The disappointment mainly stems from the industry sector, where sentiment worsened from -4.3 to -5.2. Industrial export order books have not yet taken advantage of the weakened euro.”
“This is less surprising than it looks: while the euro has given substantial ground against the dollar, it has fallen by only 7% in trade-weighted terms since the peak in March 2014. Importantly for the ECB, manufacturers sharply reduced their selling price expectations.”
“Eurozone sentiment at 100.7 in the fourth quarter is consistent with quarterly GDP growth of about 0.2%. Looking ahead, cheaper oil and the continuing weakening of the euro should start to feed through more positively in January sentiment. However, the return of Grexit fears may offset this.”
“In any case, we think that the feeble recovery and the deflationary tendency that is slowly but surely taking hold are sufficient reasons for the ECB to announce QE in two weeks’ time.”