ECB Preview: subdued wage and core inflation prospects mean it’s too early to tone down forward guidance

This piece argues that, despite recent improved €Area inflation and activity data, Draghi is likely to reiterate a highly-acccommodative ECB policy stance at Thursday’s press conference. Contrary to growing market discussions, the ECB is very unlikely to drop it’s forward guidance text on potential further rate cuts as it remains focussed on subdued core inflation … More ECB Preview: subdued wage and core inflation prospects mean it’s too early to tone down forward guidance

Trump Towers over €Area political risks: periphery yields and € pressurised

This piece considers the macro-financial implications of the Euro Area’s political risks, in greater market focus following Donald Trump’s election win (which I argued was underpriced), focussing on the 4 December Italian Consitutional Referendum.  Overall, further politics-driven market volatility seems likely, even if political concerns eventually dissipate. The main points are: Financial markets’ previous under-pricing of … More Trump Towers over €Area political risks: periphery yields and € pressurised

ECB preview: Awaiting the credit easing bazooka but several dark clouds persist

This post dissects the Euro Area macro-financial and policy situation in advance of the 2 June ECB meeting. The main points are: Draghi will likely focus on the positive prospective effects of their imminent credit bazookas (TLTRO II and CSPP) including highlighting the positive anticipatory impact of CSPP on bond issuance and spreads. That said, … More ECB preview: Awaiting the credit easing bazooka but several dark clouds persist

Trading the ECB: limited EUR weakness and bund rally likely but risks

My accompanying post details how the return of EA deflation, EA inflation expectations are in the process of de-achoring plus deteriorating EA and foreign activity mean that the 10 March ECB meeting is shaping up to be make or break for EA prospects and ECB credibility. I argued that the likely downward revisions to the ECB’s … More Trading the ECB: limited EUR weakness and bund rally likely but risks

G20 meeting: expectations of updated Plaza accord to be disappointed

Market hopes for a Plaza-type agreement at the 26-27 February G20 meeting in Shanghai 26-27 February, to help ameliorate the substantial issues facing the global economy and calm market volatility, have been growing. But I’m not expecting any really impactful policy announcements, much as I wasn’t expecting Yellen’s Congressional testimony to be a silver bullet … More G20 meeting: expectations of updated Plaza accord to be disappointed

ECB under pressure from oil and EUR strength

The early 2016 China-induced financial market volatility, including oil prices hitting twelve-year lows below $30 and sharp equity price falls, reinforces my existing bias to eventual further ECB easing in 2016 (alongside other central banks becoming more dovish e.g. Carney’s comments today,  Bullard’s recent concerns about US inflation expectations and others like the Riksbank biased … More ECB under pressure from oil and EUR strength

Don’t look back in anger: from ECB to Fed via oil weakness

With a week having passed since the ECB’s surprising “hawkish ease” it’s useful to take stock of what it all means for ECB monetary policy, the EA economy and financial markets.  And how this fits into an environment featuring an oil price collapse (and commodity weakness more generally) together with anticipation of the likely 16 … More Don’t look back in anger: from ECB to Fed via oil weakness

Draghi “we will do what we must”: keeping up the downward EUR pressure

My previous post encouraged my readers to listen the Draghi and Praet’s dovish comments rather than think of recent easier financial conditions as a reason for the ECB to ease less than expected.  So Draghi’s powerful speech today reinforces my existing view that the ECB easing on 3 December is likely to exceed market expectations (although … More Draghi “we will do what we must”: keeping up the downward EUR pressure

ECB to deliver easing despite easing financial conditions: listen to Draghi and Praet

I argue below that the ECB seems likely to at least meet market expectations for easing on 3 December, despite EA financial conditions having recently eased. While tightening financial conditions contributed to the ECB turning dovish, the reverse doesn’t apply. The fragile EA macro situation means that ECB can’t take the risk of the recent … More ECB to deliver easing despite easing financial conditions: listen to Draghi and Praet

More Euro Area Glass Half Empty Evidence, EUR strengthening not helpful

I’ve previously argued that likely weak credit and labour market dynamics pose downside risks to the nascent Euro Area recovery. And Friday’s Q2 GDP data were disappointing at both the aggregate and country level, adding to other recent weak/mixed data. Given the ECB’s unprecedented monetary stimulus, support to real incomes from lower oil price and nascent … More More Euro Area Glass Half Empty Evidence, EUR strengthening not helpful

Greek caterpillars turns into butterfly overnight?

In a surprising turn of events the Greek government seems to have last night done a complete volte face on their negotiating position with the creditors. Indeed, the proposals look close to the Creditors’ ones from last week. And that’s the deal which the Greek electorate soundly rejected in Sunday’s referendum.  That now seems like … More Greek caterpillars turns into butterfly overnight?

Greek voters take the EUR into the unknown but probably down

Exit polls suggest that the “no” campaign has scored a decisive victory in the Greek referendum, with it looking like over 60% of voters supporting Tsipras’ stance to reject the creditors’ terms. This is even though that offer has expired and Tsipras on Wednesday reportedly acceded to the majority of the creditors’ demands. The emergency … More Greek voters take the EUR into the unknown but probably down