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

Draghi fires credit-easing bazooka but undermines market impact

The ECB today vindicated my arguments for an aggressive broad monetary policy easing: rate cuts, QE expansion and credit easing at very attractive rates exceeded market expectations but were more in line with my views (I’d hoped for a 20bp deposit rate cut, accompanied by tiering of interest rates, rather than the whole rate corridor … More Draghi fires credit-easing bazooka but undermines market impact

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

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

ECB need to start to recognising “an unwarranted tightening of monetary policy”

A range of financial market developments suggest that the ECB should be getting more concerned that “an unwarranted tightening of monetary policy” is occurring. The euro TWI is up nearly 5% (due to risk aversion effects, looking likely to knock ¼pp off the ECB’s inflation forecast), EA real interest rates have risen sharply (more than … More ECB need to start to recognising “an unwarranted tightening of monetary policy”

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

EUR support from China worries likely to prove temporary in most scenarios

Recent EA macro data have continued to underwhelm – the latest subdued credit data follow Friday’s weaker than expected flash PMI – while US durable goods orders were better than expected (although core shipments disappointed). Yet the EURUSD has bounced a couple of big figures to above 1.11, apparently as China-weakness induced risk aversion and … More EUR support from China worries likely to prove temporary in most scenarios

Why has the Euro been so resilient in the face of the growing Greek crisis? Where from here?

News about the Greek negotiations has steadily deteriorated, culminating in Monday’s emergency summit (although the agony could conceivably be extended until 25-26 June Heads of States of the Union meeting). Yet at the same time the euro has been flat to rising: EURUSD is up nearly 3% on the month and 0.6% last week despite … More Why has the Euro been so resilient in the face of the growing Greek crisis? Where from here?