Tag Archives: ecb

Important week for Euro

The European Central Bank announced some measures to ease monetary policy two weeks ago. The euro had been on a downtrend since May and by these measures the ECB increased its support to the economy.

The result?

Two weeks later, EUR/USD stabilized just above 1.35.

This week’s Eurozone economic calendar will be an important test for the euro because investors will be watching to the data in order to give confirmation on the need for additional easing.

Economists are not expecting major changes in economic activity but after the plunge in investor confidence (ZEW survey), the risk is a big disadvantage of these reports.

The rate of the EUR/USD will depend mostly on Eurozone data because the U.S. economic calendar is busy with Tier 2 economic reports. The Fed needs will probably start talking about normalizing monetary policy in September, when the central bank updates its forecasts and Janet Yellen gives a press conference.

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

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. 

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ECB ready to cut rates and push banks

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/

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

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/

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Watch up #France ! Spanish 5-Year #Yield Drops Below U.S. for First Time Since 2007

Watch up France !

Spanish 5-Year Yield Drops Below U.S. for First Time Since 2007.

What will happens when you can buy Italian debt.

France is not doing enough right now. Spain and Italy doing lot.

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Ready for Webcast of the #ECB press conference 3 April 2014?

Press conference following the meeting of the Governing Council of the European Central Bank on 3 April 2014 at its premises in Frankfurt am Main, Germany, starting at 2:30 p.m.CET:

  • Introductory statement by Mario Draghi, President of the ECB.
  • Question and answer session. Registered journalists pose questions to Mario Draghi, President of the ECB, and to Vítor Constâncio, Vice-President of the EC

 

URL http://www.ecb.europa.eu/press/tvservices/webcast/html/webcast_140403.en.html

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Webcast of the ECB press conference 6 March 2014

Press conference following the meeting of the Governing Council of the European Central Bank on 6 March 2014 at its premises in Frankfurt am Main, Germany, starting at 2:30 p.m. CET:

Introductory statement by Mario Draghi, President of the ECB.
Question and answer session. Registered journalists pose questions to Mario Draghi, President of the ECB, and to Vítor Constâncio, Vice-President of the ECB.

http://www.ecb.europa.eu/press/tvservices/webcast/html/webcast_140306.en.html

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IMF calls for ECB rate cut, quantitative easing

The European Central Bank should cut interest rates and either inject more liquidity into the banking system via its Long-Term Refinancing Operations (LTRO) or start public and private asset purchases, International Monetary Fund officials said.

The ECB is due to hold a meeting on monetary policy on Thursday. Consumer inflation, which the bank wants to keep below, but close to 2 percent over the medium term, has been stuck in what the ECB called the danger zone of below 1 percent for five months.

http://www.reuters.com/

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German judges refer ECB’s bond-buying to European Court

Germany’s Constitutional Court will refer a complaint against the European Central Bank’s flagship “unlimited”  bond-buying plan to the European Court, removing the prospect of it curbing the program.

The court said on Friday there was good reason to think the scheme “exceeds the European Central Bank’s monetary policy mandate and thus infringes the powers of the member states, and that it violates the prohibition of monetary financing of the budget”.

The ECB’s Outright Monetary Transactions (OMT) programme, announced by ECB chief Mario Draghi in September 2012 at the height of the sovereign debt crisis, is widely credited with stabilising the euro.

Euro/Usd drop on this news

screenshot.24

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ECB Webcast of the press conference 6 February 2014

Press conference following the meeting of the Governing Council of the European Central Bank on 6 February 2014 at its premises in Frankfurt am Main, Germany, starting at 2:30 p.m. CET:

  • Introductory statement by Mario Draghi, President of the ECB.
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Watch it here :: ECB Webcast of the press conference 6 February 2014

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