Domestic demand should be further supported by the monetary policy measures of the ECB and their favorable impact on financial conditions as well as by the progress made in fiscal consolidation. Moreover, the decline in oil prices should provide support for household real disposable income and corporate profitability and, thereby, enhance private consumption and investment.
The exchange rate is at peak levels for the floating rate era. This is not especially surprising given the level of the terms of trade, but nonetheless it is exerting dampening pressure on the traded sector outside of the resources sector. So, overall, financial conditions are on the firm side.