Tim Riddell, an analyst at Westpac, notes that Eurozone activity data and surveys continue to signal growing risks of recession and any inflation pressures appear to the downside.

• “This week, ECB officials have affirmed their recent stimulus package, despite numerous critics stating that ECB’s NIRP is distorting the economy and financial markets while impairing the struggling financial sector.
• The departure of Draghi next month is unlikely to see any change in monetary policy, but Lagarde’s arrival could increase the urgency of the ECB’s much-repeated pleas for both fiscal and structural support.
• In the interim, Eurozone nations are compiling budget proposals for submission to the EC at the end of this month so fiscal relaxation is unlikely. Germany may be facing a recession and has a relatively favourable fiscal stance, but its finance ministry is not showing any sign of fiscal leniency. Even their recent carbon reduction initiatives are fiscally neutral.
• Despite recent data weakness, Westpac’s Data Pulse has rebounded and the Surprise Index is holding. Although this does not imply a EUR turn, it may allow for interim bounces before ECB accommodation pressures trigger redefinition of a lower trading range.”