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Eurozone: Focus on German politics and CPI data this week - BBH

Analysts at BBH suggest that the Eurozone focus this week will be on German politics after the initial attempt to forge a coalition in Germany failed.  

Key Quotes

“The SPD, which has been the CDU/CSU coalition partner in two of the past three governments Merkel led, is reluctant to return to government.  However, elections at this juncture could be disastrous as nothing has changed in the two months since it drew the least support in modern times.  And to enter into government would make the AfD the largest opposition party.  Investors seem to know two things.  First, Merkel and the head of the SPD will meet Thursday to explore the possibilities of either a new Grand Coalition or a minority government.  Second, the PMI and IFO survey data point to a reacceleration of the German economy here in Q4.”

Economic Data:  A synchronized upswing appears to be gathering steam.  Laggards like France and Italy are fully participating.  Spain also appears to be re-strengthening, like Germany.  Despite political challenges in several countries, including Ireland, where the minority government faces a trying few days, the economic momentum continues unabated.  The preliminary read of November CPI reported.  The headline is expected to rise to 1.6% from 1.4%.  Part of this reflects energy prices, but part is also due to core price.  The core measure is expected to tick up to 1.0% from 0.9%.”  

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