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Strong France, solid Germany put ECB in spotlight

Wednesday, April 26, 2017 - 01:55

French risks have reduced and German GDP forecasts are revised up but as David Pollard reports that doesn't mean the ECB will ease up on QE at its policy meeting on Thrusday. Analysts, though, are on high alert for any sign it may do so later.

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It can be a sober affair. But at this briefing by the German economy ministry the mood was upbeat. (SOUNDBITE) (German) GERMAN ECONOMY MINISTER BRIGITTE ZYPRIES, SAYING: "The German economy is on a solid growth path and we expect GDP to rise by 1.5 percent this year and in the coming year even more, by 1.6 percent." Germany, the ECB will note, is stronger. And even more of a relief for investors, so is France. A market-friendly Emmanuel Macrons appears on course for the presidency. The latest data signposts recovery. Taken together, it all adds weight to the argument for change. (SOUNDBITE) (English) CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "France is benefitting from the pick-up ... And that in itself does bring more problems. And as we head into the summer, there's going to be significant pressure on the European Central Bank to rethink its monetary stance." Draghi may point up the downside risks at his policy briefing on Thursday. And while Greek debt and Italian banks are top of that list for analysts, they're on high alert for any hint ultra-loose monetary policy could, in time, be tightened. Sources have already told Reuters that - as the hawkish voices within the ECB get louder - such a hint is possible. Despite the 'no change' expected at the meeting, that story itself was enough to drive the euro and bond yields higher. (SOUNDBITE) (English) CMC MARKETS ANALYST, MICHAEL HEWSON, SAYING: "There is a danger that the economy in Germany could start to overheat. And I think Mr Draghi would lose significant credibility if he continues to argue that risks are tilted to the downside." Like German economic briefings, ECB press conferences are at best businesslike events. Thursday's, though, is a possible thriller.