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Thursday, December 4

4th Dec - Special: ECB Previews

Previously on MoreLiver’s:

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ECB preview: No QE under the Christmas treeTradingFloor
A recent string of dovish speeches by ECB members have taken QE speculation to near fever pitch. But today is a bit too soon for an announcement.

The Fed and ECB differ sharply on the oil shockFT

Four things to watch for at today’s ECB policy meeting FT

Draghi to talk the talk, no walk yetReuters

ECB May Have Little Choice but Sovereign QEWSJ

Five Questions for Mario Draghi From Asset Purchases to TLTROsBB

Draghi Tests Speed Limit as ECB Awaits Stimulus EvidenceBB

The ECB’s Balance Sheet, if neededBruegel
The ECB has become a safety net for dealing with near-insolvency conditions

What Analysts Are Saying About The ECB's Big Decision TomorrowBI

ECB preview - ECB's timeline is tricky - isn't it?Danske Bank

Without Economic Reforms, Draghi's Easy Money Policy Is PowerlessBB

When Will the ECB Move on Monetary Stimulus?PIIE

Bundesbank chief says manipulating currencies is "dangerous"Reuters

5 Things to Watch in the ECB’s December MeetingWSJ

Has the CBPP3 inadvertently created a stigma on euro area covered bonds?Nordea

ECB Seen Triggering 50% Jump in Asset-Backed Bond SalesBB

Euro area: Inflation to fall to zeroNordea
With the latest edition of the Economic Outlook we also updated our forecasts for the Euro area. Not so much in terms of growth but for inflation that we now expect to average just 0.3% y/y next year with a clear risk of several negative monthly readings. A lower import bill supports real income and is good for growth. However, given how low inflation and inflation expectations are, we don’t expect the ECB to look just through it.

EUR inflation: Falling off a cliffNordea
The EUR inflation market is panicking right now, and the 1Y inflation swap is printing below zero for the first time since the immediate Lehman aftermath. With nominal rates anchored, this is implicit tightening as real rates are soaring. This puts immense pressure on the ECB and with Govie-QE unlikely for Thursday, and the recent moves almost too much to ignore, lesser action is very much in play right now.

Why is euro inflation so low?
Eurozone inflation has been persistently declining for almost a year, and constantly undershooting forecasts. Building on existing research, this column explores the conjecture that low inflation in the Eurozone results from an excess demand for safe assets. If true, this conjecture would have definite policy implications. Getting out of such a ‘safety trap’ would necessitate fiscal or non-conventional monetary policies tailored to temporarily take risk away from private balance sheets.

Investors see euro zone deflation in one yearReuters

The ECB must show leadership to fight threat of deflation FT

Dovish ECB waits for the December TLTRODanske Bank

The German euro is overvaluedAngry Bear

Will the ECB Start QE This Month?WSJ

ECB could fix euro zone flaw with risk-free bond: think tankReuters
As the European Central Bank comes closer to buying sovereign bonds, one London-based think tank says an opportunity has arisen to fix one of the euro zone's birth defects -- the absence of a credible "risk-free" asset.

An end to the great European bank deleveraging?FT
JPM: “Although a large part of this year’s €700bn increase likely reflects valuation effects of derivative books as we explain below, we see clear and encouraging signs that the deleveraging of the previous two years has at least stopped.”

ECB preview: An interim step ahead of sovereign QE next yearNordea
The question seems to be when, not whether the ECB will extend its asset purchases. Time is not ripe for sovereign QE. However, we expect the ECB to extend the purchases to investment grade corporate bonds and possibly also agency and supranational bonds. Even such an outcome is unlikely to push bond yields much lower in light of the falls already seen, while the euro should feel some pressure. If we are wrong, Draghi will at least sound dovish and leave the door wide open to new stimulus in Q1.

How innovative should central banks be?ECB
Keynote speech by Sabine Lautenschläger, Member of the Executive Board of the ECB

ECB bond-buying: last action heroFT / Youtube
The European Central Bank began its purchases of asset-backed securities to stimulate the eurozone economy on Friday. But it is already looking at doing more.

It's now or never, Mr. DraghiTradingFloor
Stephen Pope: Regional inflation in Eurozone at five-year lows * Bundesbank blocking ECB's path to sovereign bond purchases * Italian unemployment hits highest level since 1977

Inflation declined - but ECB likely not to act next weekHandelsbanken
Draghi needs support on QE in the eurozoneFT
The effect of trying whatever it takes may raise expectations of inflation and growth by itself

Europe’s QE front runners step upFT
Markets think it will happen but will not work