Some clue how to trade ECB news 5-Jun-2014

June 5, 2014 HeG

The following are the key points in Goldman Sachs note on the ECB meeting today

1- The rate decision will be announced at 12:45 London time. Given that a deposit cut was telegraphed a month ago, the main question is whether this decision will be in line with market consensus (a 10-15bp cut) or greater (say 20bp). In the former, we expect EUR/$ to be essentially flat into the start of the press conference at 13:30, while the latter could see the cross fall around a big figure into the start of the press conference.

2- The next stop is the opening statement, which ECB President Draghi will read out during the early minutes of the press conference. This will broadcast what credit easing measures will be taken and reveal the latest inflation forecast. On the former, the strongest signal for EUR/$ downside would come if the ECB gives a headline number for the liquidity impact of credit easing (something like “…the combined measures are ultimately expected to inject EUR200bn in liquidity), while the least favourable scenario is a kind of “rolling” LTRO, for example where banks can get liquidity for new lending every six months. The latter example would likely be a disappointment to the market, taking EUR/$ higher by a big figure or two, while the former could see EUR/$ weaken another big figure or two (especially if credit easing surprises the market, i.e., a 4-year LTRO with broad collateral and favourable haircuts or larger-than-expected ABS purchases).

3. In FX strategy, the single most important node in tomorrow’s decision tree is the inflation forecast, specifically that for outlying years. If the 2016 forecast is marked down to 1.3% or 1.4%, this would be a de facto strengthening of the ECB’s easing bias, since it would openly acknowledge that further easing measures are needed to bring inflation back to target. We see this as the strongest possible signal for EUR/$ downside, since it subsumes many different kinds of future easing, including Fed-style QE. We think this could take EUR /$ down another big figure or more, as the market updates its reaction function for the ECB. If instead the inflation forecast is left unchanged in the context of a reluctant easing, this will set the stage for EUR/$ to move back up to 1.39. 6. There is obviously lots of ambiguity in all this.

4- A lot will hang on wording, demeanor and emphasis, where there are many shades of grey. However, our basic view remains that the ECB will surprise on the dovish side tomorrow, given the drop in core inflation and the signal sent at the last meeting.

Is the Euro Ok now ?
78
A number of changes have been taken or proposed as a result of the financial crisis of August 2007 and the “Great Recession” that are worth discussing in terms of the euro crisis. Most important, though, are the changes of the period between late 2011 and 2012: strict budget rules,…
Tags: ecb, meeting, europe, economy
The European Debt Crisis Visualized
67
The European Debt Crisis Visualized http://www.bloomberg.com/
Tags: europe, economy
If Greece defaults on IMF? then ...
66
Greece could take a risky step into the unknown tomorrow if it misses, as expected, a 1.5 billion euro debt payment to the International Monetary Fund. For the moment, credit rating agencies though would not declare Greece officially "in default" on its debt, because the missed payment is to an…
Tags: will, tomorrow, economy, ecb
Greece’s Debt Due: What Greece Owes When
66
Facing a cash crunch, Greece is seeking to extend its bailout program with eurozone creditors before it expires on Feb. 28. Here’s what Greece owes, when. Source : http://graphics.wsj.com/greece-debt-timeline/
Tags: europe, ecb
Why Currencies Are Poised for More Shifts
65
The world’s major currencies, which had traded in a relatively stable range, are now in motion -- buffeted by different regional growth and interest rates as well as a simmering brew of geopolitical tensions. Differences are particularly noticeable between the U.S. and Europe, and how far apart currencies in those…
Tags: europe, ecb, credit, will, economy

ECB, Economy

ECB ready to cut rates and push banks

June 5, 2014 HeG

The European Central Bank is poised to impose negative interest rates on its overnight depositors, seeking to cajole banks into lending instead and to prevent the euro zone falling into Japan-like deflation.

At its meeting on Thursday, ECB policymakers may also launch a loan program for banks with strings attached to make sure the money actually gets out into the euro zone economy.

It will be the first of the “Big Four” central banks – ECB, Bank of England, Bank of Japan and U.S. Federal Reserve – to go the negative interest rate route, essentially charging banks to deposit with it.

Even though the risks are limited of the euro zone entering a spiral of falling prices, slowing growth and consumption, the ECB is increasingly concerned that persistently low inflation and weak bank lending could derail the recovery.

The economy grew just 0.2 percent in the first quarter, and euro zone annual inflation unexpectedly slowed to 0.5 percent in May, official data showed this week, piling additional pressure on the central bank to step in.

“Consensus for action is high so there is a … risk the ECB under-delivers relative to the market’s lofty expectations,” said Andrew Bosomworth, a senior portfolio manager at bond fund Pimco in Munich.

Since ECB President Mario Draghi last month signaled the Governing Council’s readiness to act in June, policymakers have come out in force to discuss the ECB’s toolbox, feeding expectations that a broader stimulus package is in the making.

This is likely to consist of a cut in interest rates, which would push the deposit rate for the first time into negative territory and the offer of longer-term loans linked to further lending. Large-scale asset purchases remain a distant prospect.

Cutting the deposit rate below zero would see the ECB charge banks for parking their excess money at the central bank – a step it hopes will prompt them to lend out the money instead.

Economists in a Reuters poll expected the ECB to cut its main refinancing rate to 0.10 percent from 0.25 percent and the deposit rate to -0.10 percent from zero, on top of launching a refinancing operation aimed at funding firms.

They expect bank lending to rise as a result of such measures, but foresee only a marginal impact on the euro.

The euro has fallen about 4 U.S.-cents against the dollar since the ECB’s May meeting, hitting $1.3586 last Thursday.

http://www.reuters.com/

ECB cuts euro zone rates in surprise move. But ...
83
Though ECB cut was covered by the Press in great details but only a few analyzed the results of such measure. Only independent writer/economists talked about the potential losers and winners of the situation. In this article featured in The Telegraph , an economic writer talks about critiques the actions of…
Tags: rates, ecb, rate, interest, euro, zone, cut, bank, central
Deflation for Euro region ?
82
European Central Bank President Mario Draghi hoped never to see this moment: Consumer prices in the euro region have dropped by 0.2 percent, according to December figures just published: Deflation -- a sustained period of falling prices that discourages consumers from spending and businesses from investing -- threatens to worsen the…
Tags: euro, percent, ecb's, meeting, inflation, central, bank, falling, ecb
The Future Of The Euro Could See Trouble This Week
81
It was almost exactly five years ago that the euro crisis erupted, starting in Greece. Investors who had complacently let all euro-zone countries borrow at uniformly low levels abruptly woke up to the riskiness of an incompetent government borrowing money in a currency which it could not depreciate. There…
Tags: euro, zone, will, ecb
ECB’s Draghi takes up new weapon in war on deflation
80
Runners have target times, golfers judge themselves by their swing, while Mario Draghi watches a technical measure of inflation expectations used by financial markets. Just one problem: it suggests the European Central Bank president is not achieving his objective – and that markets’ fears of eurozone deflation are mounting. Since…
Tags: inflation, central, ecb, rate, expectations, euro, bank
Greek Banks Secured an Additional, Hidden €41 billion Bailout from European taxpayers
78
In 2013 Greek taxpayers borrowed from the rest of Europe’s taxpayers €41 billion to pump into the Greek banks. This is well known. What is not known is that, also in 2013/4, the Greek banks received an additional, well hidden, €41 billion bailout loan from Greek and European citizens. This…
Tags: bank, banks, euro, economy, ecb

BOE, ECB, Economy, FED

Unprecedented stimulus by the Fed and other central banks made many traditional models useless,

June 2, 2014 HeG

If the insatiable demand for bonds has upended the models you use to value them, you’re not alone.

Just last month, researchers at the Federal Reserve Bank of New York retooled a gauge of relative yields on Treasuries, casting aside three decades of data that incorporated estimates for market rates from professional forecasters. Priya Misra, the head of U.S. rates strategy at Bank of America Corp., says a risk metric she’s relied on hasn’t worked since March.

After unprecedented stimulus by the Fed and other central banks made many traditional models useless, investors and analysts alike are having to reshape their understanding of cheap and expensive as the global market for bonds balloons to $100 trillion. With the world’s biggest economies struggling to grow and inflation nowhere in sight, catchphrases such as “new neutral” and “no normal” are gaining currency to describe a reality where bonds are rallying the most in a decade.

http://www.bloomberg.com/

Why Currencies Are Poised for More Shifts
71
The world’s major currencies, which had traded in a relatively stable range, are now in motion -- buffeted by different regional growth and interest rates as well as a simmering brew of geopolitical tensions. Differences are particularly noticeable between the U.S. and Europe, and how far apart currencies in those…
Tags: u.s, ecb, federal, reserve, bonds, global, yields, rates, bank, central
Currency pairs getting punished on central bank comments.
68
http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech986.pdf https://www.bloomberg.com/news/articles/2017-06-28/draghi-s-prudence-warning-confirmed-by-reaction-to-his-own-words
Tags: central, bank, currency, ecb, boe
Why you should care about bonds even if everyone is talking about stocks
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The US stock market gets all the attention, but the bond market is where the real fortunes are made. Chris Arnade, a former bond trader, describes the unsmiling, powerful markets that move companies and governments On Wall Street, nearly everybody trades either stocks or bonds. Stock traders are the smiling…
Tags: bonds, fed, ecb, boe
Reminder :: Quantitative easing alone will not do the trick
66
Very low inflation poses a mounting threat to the economic stability of the eurozone. The rate of consumer price inflation has been below 1 per cent since October, and hence far below the European Central Bank’s (ECB) target of just below 2 per cent. This highlights the degree of weakness…
Tags: inflation, ecb, demand, central, bank, economy, currency, fed
No central bank had considered any of these measures
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Who would have thought that six years after the global financial crisis, most advanced economies would still be swimming in an alphabet soup – ZIRP, QE, CE, FG, NDR, and U-FX Int – of unconventional monetary policies? No central bank had considered any of these measures (zero interest rate policy,…
Tags: economies, demand, central, bank, global, banks, market, inflation, fed, ecb

book

The 5 Books Every Entrepreneur Should Toss in Their Beach Bag

June 2, 2014 HeG

Entrepreneurs work hard all year long to ensure their businesses become successful and stay successful, but everyone needs a break to relax and reflect. If you start feeling guilty about heading to the beach this summer don’t.

Here is a list of summer reads that will keep you thinking and inspired — even from your Adirondack.

http://www.entrepreneur.com/article/234350

Previous post : https://www.currencyfundgroup.com/2014/05/21/9-books-every-entrepreneur-should-read/

Stop Reading and Start Learning: How to Absorb Information Better
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Business is full of dry, boring material that needs your attention. Here, Inc. columnists share ways to get through the drudgery. There is no shortage of material that needs to be read in business, including marketing copy, business plans, contracts, legal documents, and, of course, business books. I love to read,…
Tags: start, success, will, books, book
13 Questions Every Leader Should Think About (Often)
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Do you keep 50% of your time unscheduled? This sounds like a strange question—in fact, for those of us with back-to-back meetings and to-do lists a mile long, it might sound downright silly. But if you’re a manager, leader, or entrepreneur, it’s one worth pondering. As Dov Frohman explains in…
Tags: entrepreneur, list, work, will, year, don, book, long, hard, successful
Do you read ? which new software are you installing
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Tags: book
Business Books to be read - List -
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http://julliengordon.com/the-10-best-business-books-for-side-hustlers http://petracoach.com/book/
Tags: list, books, book
How Bill Gates Thinks
59
Author Steven Johnson talks to the engineer turned philanthropist about the future, technology, ice, capitalism, and optimism. When interesting people hang out, interesting things tend to happen. So when we found out that Steven Johnson, author of Where Good Ideas Come From andThe Ghost Map was going to sit down…
Tags: book, year, success

Calendar

MARKET NEWS WEEK 1-7 June 2014

June 1, 2014 HeG

China

Sunday, June 1, 2014