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ECB governing council member Olli Rehn, commenting on today’s flash Euro-zone CPI print, said that Euro-area inflation is gradually converging to target, though inflation just above 1% reflects weak domestic price pressure.

Additional quotes: 

   •  Expects ‘mild rebound’ in growth in Q4.
   •  Prospects for returning to conventional interest rates, balance sheet have strengthened.
   •  Natural rate significantly lower than before crisis.
   •  Emphasises need for gradual steps.

The European Central Bank (ECB) policymaker Ewald Nowotny, referring to the latest GDP growth figures, said that it has not seen anything that would require an adjustment of monetary policy outlook.

   •  We expect a positive economic outlook to continue but risks exist.
   •  Assumes monetary policy normalization steps will be carried out as announced, including the end of bond purchases at end of the year.
   •  On growth, one must distinguish between longer-term trends and special effects, and currently, there are some special effects including German auto deliveries.
   •  Difficult to say what effect of US trade policies will have.
   •  Much of it is more announcements than measures but those too can have a psychological effect.
   •  Risk of hard Brexit being taken ever more seriously.
   •  We have seen a certain stabilization of Italian bond spreads, albeit at a high level.

According to Steven Trypsteen, Economist at ING, the Spanish figures are good, with the economy growing at 0.6% QoQ (2.5% YoY) in the third quarter, the same pace as in the second.

Key Quotes

“Given Tuesday’s figures from the Eurozone as a whole, things didn’t seem to be boding well for Spain. The Eurozone economy slowed to a growth rate of 0.2% QoQ in the third quarter from 0.4% in the previous one, and with Spain being the fourth largest economy in the Eurozone, this could have implied much slower growth in Spain given a weaker external environment, as the Eurozone is the largest export destination for the country.”

“On top of that, survey indicators in the third quarter continued their downward trend; the Purchasing Managers’ Index (PMI) has notably dropped quite sharply in recent months.”

“We forecast an annual growth rate of 2.6% in 2018 and 2.0% in 2019, a clear deceleration of economic activity given the more than 3% growth since 2015.”

Bank of Italy Governor and ECB governing council member Ignazio Visco was out on the wires in the last hour, commenting on Italy’s debt situation and said:

   •  Italy cannot narrow the growth gap with EU with higher spending.
   •  Italy’s slow growth caused by companies’ low productivity.
   •  Economic slowdown more marked than the rest of the EU.
   •  Policies guaranteeing balanced financial conditions are needed to protect savings.
   •  Foreign investors sold 82 billion Euros in sovereign bonds in the May-August period.
   •  Widening of Italy/Germany spread reflects the risk of default and redenomination in equal measures.
   •  Spreads impacted by doubts about Italy’s policies, EU relations.
   •  If the rise in Italian state bonds is not reabsorbed it will cost over 5 billion Euros in 2019. 
   •  The rise in funding costs and depreciation of banking shares will make access to credit harder for families and companies.
   •  Italian debt is sustainable but the determination to keep it such must be clear.
   •  GDP growth this year will be 1%, lower in 2019, without taking into account budget measures.
   •  Italy can cope with the end of low interest rates, provided it sticks to the fiscal policy aimed at budgetary stability.
   •  Italy must sell in 2019 400 billion Euros in state securities to refinance maturing debt and cover year’s deficit.

The Islamic Republic of Iran Broadcasting news agency quoted Iran’s President Hassan Rouhani, as saying that Iran is not scared of the new US sanctions that come into effect from November 4, targeting Iran’s oil sector.

Key Quotes (via Reuters):

“(Nov. 4) of this year signifies a new injustice from the Americans,”

“But the people should know with certainty that the government has no fear of American threats.”

The European Central Bank (ECB) Governing Council member Ardo Hansson is on the wires now, via Reuters, making a scheduled speech

No significant change to raise doubt over ECB forecast.

Temporary factors affecting euro area growth

Would not make big conclusions based on prelim Q3 GDP data.

December staff projections will look at what factors in slowdown are temporary and how many permanent.

On Italy: important that the rules which have been agreed upon are followed.     

Analysts at TD Securities expect a 9-0 vote for no change, as the BoE sits on the sidelines until Brexit clarity emerges.

Key Quotes

“The new forecasts are likely to show relatively little change. The MPC is likely comfortable with the current slope of the yield curve, which shows about one hike priced in for 2019.”

“FX: GBP is oversold, making it vulnerable to a hawkish surprise. But with little expected from the BOE, a catalyst for a reversal will depend on Brexit and broad USD tone. This will require more patience.”

The Austrian economy grew by 0.5% QoQ in the 3Q according to a first flash estimate from the Austrian Institute of Economic Research, 0.3 percentage points above the eurozone GDP growth rate, points out Inga Fechner, Economist at ING.

Key Quotes

“The more volatile Eurostat measure confirms the positive picture, coming in at 0.4% quarter-on-quarter. Second-quarter growth was revised down a notch to 0.6% from 0.7% (Eurostat: 0.3%). While momentum continues to decline, overall, economic growth remains favourable with the economy remaining on track to grow 2.8% year-on-year.”

While below the 0.7183/0.7260 area, the Aussie Dollar is expected to remain under pressure, noted Karen Jones, Head of FICC Technical Analysis at Commerzbank.

Key Quotes

“AUD/USD continues to recover near term and we would allow for a rally to the 55 day moving average at .7183 and the .7260 2018 channel and while capped here this will leave the market under overall pressure”.

“We are looking for reversal for a number of reasons – we have TD support at .6995, the large divergence of the daily RSI and the 13 count on the weekly chart”.

“A close above the channel would be required to negate downside pressure and trigger a move to the .7474 9 th July high on the way to the 200 day ma at .7505”.

Analysts at Danske Bank point out that yesterday, euro area Q3 GDP growth came in at a four-year low of 0.2 % below consensus and their expectations (0.4%).

Key Quotes

“In the absence of a component breakdown, we expect that growth was primarily driven by domestic demand in light of lingering external headwinds on the trade front. In terms of country composition, weaker activity was likely to have been driven primarily by Italy and Germany, and could not be fully compensated for by an acceleration in the French Q3 growth rate.”

“We lower our 2018 euro area GDP growth forecast to 1.9% based on weak data, but we still look for a small rebound in Q4 to 0.4%, primarily on the back of a recovery in German activity as production bottlenecks in the car industry subside.”

“We do not think the data will ring alarm bells at the ECB as growth remains above potential (1.5%), but it strengthens the case for a downward revision of the GDP growth forecasts at the December meeting.”