A note (fixed interest focus) from SG, the headline quote is referring to the eurozone economy but I reckon its a decent one-liner for the euro also
Says Société Générale (in summary):
- Cautious optimism on euro area economy - but Italy remains a wildcard.
- improving wage data in the euro area
- ECB's confidence in the convergence of inflation towards its medium-term objective
- negative economic surprises in Europe have stopped deepening since late spring
- Economic growth in 2018 risks being lower than generally projected at the beginning of the year, but probably not much below the ECB forecast of 1.9%
- Recent easing in trade tensions with the US could support economic sentiment
- But Italian uncertainties remain a wildcard for the cautiously optimistic outlook for the euro area economy
(I'm gonna have to but in here and disagree with 'recent easing in trade tensions with the US')
Back to SG, this time more specifically on the currency (from an FX note), SG like the EUR higher; forecasts:
SG summarise, looking for a weaker USD and a stronger euro:
- The near-term factor is the evolving US business cycle, which we believe is maturing, as evidenced by the flattening yield curve.
- At the same time, the evolving Brexit picture and European economic dataflow will influence the euro and sterling legs of key dollar exchange rates.
- We expect the European recovery to gain strength going forward.
- Over the medium-term, we have deteriorating US fiscal and external balances in the background, plus the dollar's still-rich valuation exerting a (weak) gravitational effect on the currency. Beyond all this is the lurking risk of more forceful policy action by the Trump administration to weaken the dollar.