The widespread feeling after the November ECB meeting was that we should prepare for the beginning of the central bank’s exit strategy possibly, at least in terms of announcements, already at the December Governing Council (GC) meeting. The rationale for this is that on November 13 we will have the final confirmation that in 3Q […]
“Did we miss something?” Pros and Cons for a sustainable and strong eurozone recovery after 3Q 2009. Euro Thoughts October 19 -23 2009
The good news of last week was, as we flagged, the rebound in August industrial production with large upward revisions to previous data, while the not-so-good news was the first signs that investors’ sentiment, as measured by the ZEW index, is leveling off. Key figures of this week will be the flash release of October […]
More than the uneventful October ECB meeting, the stream of strong IP numbers in the three largest economies of the area was the real news of last week. As a consequence, we decided to revise up our eurozone GDP forecast for the third quarter. We now see 3Q GDP at 0.4% qoq vs. our previous […]
The much-awaited 12-month Long-Term Refinancing Operation (LTRO) held on September 29 resulted in a total allotment of EUR 75.2bn in favor of 589 banks. The outcome is at the low end of the forecasts spectrum (ranging from EUR 50bn to EUR 300bn) and below our bet of a result within the EUR 125-175bn interval. More […]
The ECB’s Deposit Facility and its Guard Against Inflation – Euro Thoughts Sep. 21-25, 2009 – UniCredit Group
Last week, we have shown how the current situation in the eurozone banking system is one of a large liquidity surplus, and that the increase in excess reserves – the sum of pure excess reserves and deposits held at the ECB – has been sizeable and to be ascribed almost entirely to the ECB’s policy […]
Educated Guesses on the Upcoming ECB Auction and Thoughts on some Crisis Legends… – Euro Thoughts Sep 13-18 2009
The September press conference and the following interventions by Trichet, Weber, Bini Smaghi and other Council members have definitely clarified that the ECB is in no rush at all to act on rates; rather it wants to have at hand more concrete evidence that the recovery is gaining momentum and price risks start moving to […]
Last Thursday my boss, Marco Annunziata, did not hesitate to define President Trichet a true statesman for his wise and transparent conduct of the ECB September press conference. In the last few weeks, with his intervention in Jackson Hole, the Sep 4 presser, and the op-ed in the Financial Times the following day, Mr. Trichet […]
Inflation fears are a widespread feeling in markets these days. The recent stream of positive (or less negative) economic data from US, China and Emerging Markets (EM) in general and, to a lesser extent, the euro area has reinforced this feeling. As a consequence, medium-term breakevens have risen sizeably and in meeting with clients and […]
The current hot topic in the market isthe EMU breakup. Similar fears already spread across the markets in 2003 and 2004 when France and Germany paved the way to a “more flexible” SGP, and Italy’s Maroni said that he was thinking of calling a referendum to allow Italy to leave the single-currency area blaming the euro for the rise in the general level of prices and the loss of competitiveness. Last week, Standard & Poor’s put Ireland, Spain, and Portugal “on negative watch” and downgraded Greece by one notch. Consequently, peripherals sovereign cash and CDS spreads have widened further and betting websites now assign about 30% probability to the scenario of one country dropping the euro.
It’s ECB week. With the rate-setting Council meeting, we should get a clearer clue on where the ECB is headed and what is going to be the historical floor of the refi rate we should expect this year. Datawise, the only relevant release will be the final estimate of December HICP.