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Wednesday, June 6

6th Jun - ECB & FED Previews

Just a quick collection from previous posts to help you in guessing what will come out of the ECB's meeting and Bernanke's address tomorrow.

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ECB preview: We expect ECB to cut in JuneDanske Bank (pdf)

Time for the Draghi and Bernanke PutsHumble Student
The ECB is likely to reduce interest rates in the face of economic weakness in the eurozone, but don't expect too much more…My guess is that investors looking for hints of another round of QE from the Fed on Thursday are likely to be disappointed.

Fed policy: So many risks, so few toolsMacroScope / Reuters
there is not very much more the central bank can do to effectively boost economic growth and bring down unemployment… That doesn’t mean the Fed won't try.
Pond Says More Fed Stimulus Is `Increasingly Likely'BB (mp3)

ECB Under Pressure to Ride to the Euro's RescueNYT
While the situation in the euro zone appears bad now, it could get much worse… The ECB may decide it needs to keep some firepower in reserve, to address even more serious circumstances and to keep the heat on political leaders.
ECB and FOMC focus: Reform or not? C'mon!Saxo Bank
Steen Jakobsen: It may not be politically acceptable, but Germany is right, and involuntarily so. This week and the next will tells us whether the ECB goes for reform or not. If Draghi does anything then talk of reforms needs to stop – and Europe is worse off. If Draghi waits (until June 17 and the next EU Summit), then at least he tried.

ECB and euro governments play chickenHugo Dixon / Reuters

The euro zone crisis is a multi-dimensional game of chicken. There isn’t just a standoff between the zone’s core and its periphery; there is also one between the ECB and the euro zone governments over who should rescue the single currency. In such games somebody usually blinks. But if nobody does, the consequences will be terrible.

The latest out of Europe, and an ECB preview alphaville / FT
Citi’s view on ECB’s available tools: we are going into the meeting expecting disappointment, but ready to be surprised if the ECB takes a more aggressive stance.

Goldman Previews ECB "Hope For Best, Prepare For Worst"ZH
We expect the ECB to keep rates on hold this Wednesday and also expect no announcement of further non-standard measures...but would come out in force if needed

The State of Confusion and the ECBMarc to Market
We have suggested that the market is under-estimating the risk of action by the ECB.

Only So Much ECB Can Do About CrisisWSJ
With Greek elections approaching—and its future in the euro at stake—as well as a critical European Union summit looming at the end of June, a "shock-and-awe" response from the ECB seems unlikely just yet.

Will rates stay low, QE or no? alphaville / FT
JP Morgan, Deutsche Bank commentary

Goldman's Confidence That QE Will Be Announced On June 20 "Has Grown" ZH
Our baseline remains that Fed officials will purchase a mixture of mortgages and long-term Treasuries,

The TIPS curve has invertedSober Look
However this move in TIPS certainly raises the risk of near-term deflation, driven by weak demand growth. And deflation is notoriously difficult to get under control.

Betting on QE3? Not So Fast…MarketBeat / WSJ
In the past, the Fed has been quick to act when it seems that the risk of deflation is growing. But in this chart it doesn’t seem like the market is pricing in much of a chance of deflation.

Fed(wire) to the rescuealphaville / FT
Hilsenrath notes that the Fed’s main options are doing nothing; doing some more signalling; a short extension of Operation Twist; or outright new bond purchases.

Save Us, Ben Bernanke, You're Our Only HopeThe Atlantic
How Star Wars tells you everything you need to know about the miserable U.S. recovery and the Federal Reserve that has failed to improve it.

Morgan Stanley Sees QE3 Rally Lasting Hours Not WeeksZH

Drumbeat’s Getting Louder: the Fed Must Save the WorldMarketBeat / WSJ

Lloyds’s Schmidt Sees More Asset Purchases by FedBB (mp3)

RDQ’s Ryding Says Fed Will Extend Operation TwistBB (mp3)
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