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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 37 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 37 institutional desks. No promotion.
The desk views the recent trends in Eurozone industrial production as reflective of ongoing economic challenges, with July's production declining by 0.1% month-on-month, consistent with June's performance. Per the full note from ING, while the manufacturing sector had a surprisingly resilient start earlier in the year, the latest figures indicate a pause in that momentum, particularly in consumer goods. This lack of growth may temper any expectations for a significant contribution to GDP in the near term, aligning with a cautious outlook as we approach the final quarter. In the absence of any high-impact catalysts on the calendar, attention will be focused on upcoming PMI readings for further clues on corporate sentiment and production trends.
The desk argues that Eurozone manufacturing is experiencing a significant slowdown, as indicated by July's industrial production figures remaining flat year-on-year. Per the full note from ING, this pause serves as a wake-up call for an industry that appeared to have regained some footing early this year after four consecutive months of growth following post-January downturn.
Despite ongoing external pressures such as rising energy prices, the PMI data suggests a recovery in sentiment among manufacturers, indicating potential for improvement later in the year. However, given the current figures, the desk believes GDP growth linked to the manufacturing sector will be minimal in Q3, leaving room for cautious optimism but no concrete validation yet.
Our consensus on the EUR/USD pair targets a midpoint of 1.075, with a range between 1.04 and 1.12. Noteworthy firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This desk's perspective leans towards the cautious end of the spectrum, reflecting wider concerns regarding Eurozone growth, particularly as it relates to the manufacturing sector's contributions.
Several firms share a cautious outlook, anticipating muted growth in Eurozone manufacturing, including bofa with a low-end target. Conversely, firms such as jpmorgan expect a more favorable trajectory for the EUR/USD pair.
Currency pairs like EUR/USD remain the focal point regarding sentiments influenced by Eurozone manufacturing data. Additionally, market players should keep an eye on the reaction of the ECB's policies, as shifts in monetary policy may further dictate Euro performance.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
The primary focus will be on the PMI figures set to release soon, which could either affirm or contradict the current cautious sentiment reflected in the recent industrial output data. A significant deviation from expectations in these readings could influence the EUR/USD trajectory.
Risks to this view
An unexpected surge in industrial production or a pivot in ECB's monetary policy could invalidate this cautious outlook, potentially propelling Eurozone growth and positively impacting the EUR/USD pair.
Older quick take Quick take Published 10:30 Eurozone industry still lacks momentum As in June, eurozone industrial production declined in July by 0.1% from the previous month. This serves as a reality check for manufacturing after a surprisingly decent start to the year Production figures are still lacklustre, but some hope remains for a stronger performance towards the end of the year After a weak January, eurozone industrial production grew for four months in a row despite the Middle East crisis and higher energy prices. A boost from European industry's relative comparative advantage over Asia helped a surprisingly resilient production recovery.
Besides that, extra defence spending efforts are helping certain manufacturing sectors more structurally. But the recovery has paused in recent months. The latest industrial production figures are hardly disastrous, but they do underline a picture of lost momentum.
Production in the eurozone fell by 0.1% in July after already declining by 0.1% in June, leaving production broadly flat compared with a year earlier. While sectors such as capital goods and energy still showed some resilience, weakness in consumer-oriented industries remains striking, particularly for non-durable consumer goods, where production was down sharply compared with last year. But while production figures are still lacklustre, sentiment among manufacturing corporates is becoming more upbeat again.
The PMI indicated accelerating output in August, despite energy prices rising again. So while manufacturing is unlikely to contribute much to GDP growth over 3Q, there is hope for stronger performance towards the end of the year. GDP Eurozone Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Bert Colijn Chief Economist, Netherlands Older quick take
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