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/STIR: Goldman Sachs: Euro Area Recovery, Not Reflation

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Goldman Sachs write “despite the ongoing improvement in PMIs, we continue to think the European data set is consistent with policy easing.”

  • “The improvement in both sentiment and hard data in the Euro area is being driven by ongoing relief in energy prices, a supply-side loosening that means the ECB has little to fear from the recent growth improvement.”
  • “On the price front, although some measures of wage growth have ticked up, we think the broader trend of wage moderation is intact.”
  • “The ECB’s wage tracker, more timely indicators such as Indeed job postings, and surveys all point in the right direction.”
  • “Importantly the ECB had also anticipated a bumpy path in Q1 and share our more benign forward-looking outlook.”
  • “In that set-up, we expect curve steepening into the start of the cutting cycle in June and think markets can price more cuts in 2025 in particular, as pricing of easing remains very cautious.”
  • “We would also argue that while European rates continue to be exposed to US spillovers, the ongoing decoupling with EUR rates volatility has some room to run.”
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Goldman Sachs write “despite the ongoing improvement in PMIs, we continue to think the European data set is consistent with policy easing.”

  • “The improvement in both sentiment and hard data in the Euro area is being driven by ongoing relief in energy prices, a supply-side loosening that means the ECB has little to fear from the recent growth improvement.”
  • “On the price front, although some measures of wage growth have ticked up, we think the broader trend of wage moderation is intact.”
  • “The ECB’s wage tracker, more timely indicators such as Indeed job postings, and surveys all point in the right direction.”
  • “Importantly the ECB had also anticipated a bumpy path in Q1 and share our more benign forward-looking outlook.”
  • “In that set-up, we expect curve steepening into the start of the cutting cycle in June and think markets can price more cuts in 2025 in particular, as pricing of easing remains very cautious.”
  • “We would also argue that while European rates continue to be exposed to US spillovers, the ongoing decoupling with EUR rates volatility has some room to run.”