Eurostat’s recent revision of the HICPxT index could have two potentially wide-reaching effects for euro area inflation-linked bonds (ILB) investors.

We think Thursday’s downgraded growth assessment is a precursor to two changes in the ECB’s monetary policy stance later this year.

Will the ECB have sufficient firepower – and support from the population – to spur the economy when the next recession arrives?

We expect volatility, along with a potential rise in UK sovereign yields and strengthening of the pound.

We see a number of U.K. assets pricing in a relatively high chance of a disruptive Brexit.

In Europe, the secular risks appear to be materializing more quickly than expected, particularly in Italy.

Europe’s unconventional monetary policies and low levels of interest rates are likely to persist.

Investors in Europe are more optimistic than they have been in years, but there is growing concern that U.S. dollar weakness could make the euro too strong.

The ECB’s exit from QE will continue to be a major factor influencing markets, particularly if it happens faster than anticipated.

Our central expectation for the European Central Bank (ECB) meeting on 26 October is for the Governing Council to extend asset purchases by nine months at €30 billion per month to September 2018, without yet committing to a specific end date, while strengthening its commitment to keep policy rates and the balance sheet unchanged when asset purchases end next year.

Despite the AfD’s gains, Germany’s election shouldn’t prove disruptive for financial markets.