Previously
on MoreLiver’s:
W/E: Weekly Support (updated!)
AFTER
Draghi song remains
the same — EURUSD spikes higher – TradingFloor
Draghi Signals ECB
Ready to Wait Until March for Action – BB
Recovery hopes win
from deflation fears (at least for now) – Merkelnomics
Recovery hopes win
from deflation fears (at least for now) – Merkelnomics
What
Mario Draghi Said Today (Not All That Much) – WSJ
Draghi
stays out of the sandbox while others play on – WaPo
High
unemployment putting the ECB in isolation – MacroScope
/ Reuters
BEFORE THE EVENT
My own thoughts:
ECB
Preview: End of sterilisation? – TradingFloor
While the ECB will not necessarily act this week, a consensus has formed
that something will be coming. Sterilisation, the sacred cow of hard money
policy, could be near the end of the road.
Draghi as ECB Master
of Suspense Keeps Investors on Edge – BB
Can the ECB finally
deliver more than hot air and topple EURUSD? – TradingFloor
What to Expect From
the ECB Meeting – WSJ
ECB – stick or twist? – MacroScope
/ Reuters
ECB Picks Through
Dwindling Options – WSJ
Quantified negativity
and the ECB – alphaville
/ FT
Deutsche Bank’s George Saravelos on negative rates: negative ECB rates
are worth at least 2-3% on the currency, provided the ECB is able to push EONIA
down to a +5/-5bps range from around 10bps currently. Even if no action
materializes today and EUR/USD squeezes higher, we think the persistent risks
to European inflation and the divergence between Fed/ECB policy should be worth
at least 10 big figures of downside by year-end.
The ECB Divides
Expert Opinion MoneyBeat – WSJ
From my older posts:
ECB's
next steps could involve suspending SMP sterilization - instant QE – Sober Look
An
ECB Nail-Biter: Will It Cut Rates? – WSJ
ECB Preview – Marc to Market
The ECB meets on Thursday amid heightened speculation it will make a new
initia
tive given the deterioration of the two pillars of its monetary policy,
money supply and inflation.
Deflation,
now vs then – alphaville / FT
As we await for the ECB to act or not later in the week, Capital
Economics’ Jonathan Loynes took the time to note there are good reasons to think
a new bout of deflation could be both longer- lasting and more pernicious than
the last one
If
Not Quantitative Easing, What Can the ECB Do? – PIIE
Admittedly, purchases of private bank assets by national central banks
would not help the rebalancing of the euro area. They also would not require Germany and other core
countries to boost domestic demand and accept higher inflation. But Germany is more likely to
accept this course of action now than to pursue greater inflation throughout
the euro area, even at the risk of future risk mutualization.
The ECB should be
more aggressive on monetary policy – Bruegel
Promise to do “whatever it takes” stabilized
the euro but hesitant stance to fight low inflation or even deflation will
undermine stability
ECB preview: Another
refi rate cut – Danske Bank
At the ECB meeting last month, Mario Draghi described two scenarios that
would lead to action. We saw both of these triggers materialize in January.
Therefore, we expect the ECB to ease again on Thursday
Are further falls in
inflation putting more pressure on the ECB to act? – Open Europe
The data suggests to us that the ECB will wait until its March meeting
and its updated inflation forecasts to make a judgement – but then again it
went a month earlier than expected in November. As for how, the most likely
tools remain some form of targeted LTRO and/or purchases of bank loans but both
programmes would require significant work and have numerous shortcomings
Euro zone inflation
falls again; economists base ECB rate cut calls on déjà vu – MacroScope / Reuters
Only two of 76 analysts in a Reuters poll conducted before news on
Friday that January euro zone inflation fell to 0.7 percent said the ECB would
trim its refinancing rate below 0.25 percent this week. Now a few more say they
will. While many economists say the decision is a close call, most lack
conviction over whether it will do any good.
ECB to reveal
strategy for bank health checks by end-March – Reuters
The ECB kept the euro zone's top lenders on tenterhooks as it promised
to reveal the strategy for its unprecedented review of bank balance sheets by
the end of March, giving only scant detail on Monday.
Euro dogged by ECB talk, emerging markets
sell-off grinds on – Reuters
Growing pressure for
more policy easing in the euro zone pinned the euro near a 10-week low on
Monday while persistent tension in emerging markets drove Hungary's forint to a 10-month trough and weighed on
global stocks.
The heat is on the ECB... again – Nordea
At the January ECB
meeting, Mr Draghi identified two triggers that could prompt new monetary
easing: an unwarranted tightening of the money markets, and a worsening of the
medium-term outlook for inflation. We believe none of the two triggers have
been hit and hence expect no new ECB easing, but the tone of Mr Draghi is
likely to remain dovish in the coming months.
To be, or not to be sterilised in the Eurozone? – alphaville / FT
Citi’s research team
highlights the important point that Germany’s Bundesbank has signalled that it is open to an end to ECB sterilisation
operations. The move follows consecutive failures by the ECB to sterilise its
bond purchases in the last month.
ECB to reveal strategy for bank health checks
in first-quarter – Reuters
5 reasons the ECB will act in the months ahead – Sober Look
Liquidity, credit,
monetary aggregates, disinflation
Bundesbank would favor end of sterilization to
boost liquidity in bank system
– WSJ
The Bundesbank would
favor an end to the ECB’s policy of withdrawing large amounts of money from the
banking system to offset its government-bond holdings, a person familiar with
the matter said.
Weekly Focus: Case for
further easing by ECB – Danske Bank
Lower
inflation has strengthened the case for further ECB easing as soon as the
meeting next week.
Week Ahead – Nordea
US: ISM manufacturing survey, labour market report. We expect a setback in
the ISM to 55, and we expect the weather to have effected payrolls negatively
again in January, 150k, consensus 180k. Euro
area: ECB meeting on Thursday, Draghi’s press conference dovish. Final PMI
, German order intake and production. UK:
no rate- or QE-changes. A new or updated forward guidance framework could
be adapted, but unlikely.
Strategy: Too early to call
the bottom in risk markets – Danske Bank
Too early to call the bottom
in risk markets. Chinese data will be key for EM and risk assets in coming
months. Euro-area inflation expectations very low – more pressure on
ECB.Downward pressure on bond yields intact in the short term. Euro-area recovery on track despite weak credit data
ECB deflation risk denial has echoes of 2009 – Reuters
It may be true that the
euro zone is further away from deflation now than it was in 2009, not long
after a historic crash in stock markets around the globe. But waiting for
deflation to set in while hoping for a different outcome could derail an
already very fragile economic recovery.
The ECB is much too stodgy – Bruegel
The
euro fuelled a leveraged bet that went bad. The ECB is best positioned to
orchestrate the painful sharing of losses. If the ECB does not reinvent itself
for the times, it will be hobbled by its obsolescence and by increasingly
acrimonious politics. And the flawed euro project will be further damaged.
Euro area deflation
monitor
– Danske Bank
The
lower inflation is not contradicting stronger growth in the euro area, in our
view. Lower commodity prices have increased purchasing power and the most
recent decline in core inflation is due to methodological changes and not a
result of a drop in wage growth. Real wage growth has shown a clear improvement
from its previous decline.
ECB Bond Sterilization Fails Again – WSJ
ECB failed for the second
time this year to fully drain the market of the more than €170 billion in
government bonds it still holds under its previous bond-buying program.