7th Nov - ECB Special

ECB Preview and Post-Mortem! This post will be updated.

Live links

Livewebcast of the press conference

Press conference transcripts

Commentary

The Wall Street Journal

The Financial Times

Transcript of the press conference – Businessweek

AFTER

The ECB cuts… - FT

Instant view: ECB cuts refi rate by 25 bp – Nordea

An ECB pre-yawn – FT

ECB cuts rates to new low, signals readiness for further action – Reuters

ECB Cuts Key Rate to Record Low to Fight Deflation Threat – BB

Wonkblog: Super Mario to the rescue: The ECB cuts interest rates – WaPo

ECB viewpoint: Dovish Draghi delivers – Nordea

 

The ECB’s Rate Cut: Five Key Takeaways – WSJ

ECB rate cut: the analyst reaction – FT

ECB cuts the refi rate – Danske Bank

What Caused the ECB to Cut Rates? – WSJ

ECB rate cut takes markets by surprise – time to crack Draghi’s code – Reuters

Forced to act – The Economist

Horizons: ECB’s ‘Surprise’ Reflects a Lack of Transparency – WSJ

The ECB Is Less Hindered by Euro Area Politics – PIIE

ECB’s Move Could Benefit Asia’s Exports and Capital Markets – WSJ

Mario where's my LTRO? – TradingFloor

An ECB rate cut without another LTRO is a complete waste of time. The market wants free cash and loads of it as per the US. If Draghi won’t give it to them, they won’t do what the ECB wants, which is a weaker currency and a reflated economy.

Another backhand volley from forward guidance – Reuters

A weak euro is Europe’s best means of beating deflation – The A-list / FT

 

BEFORE

NOV-7

European Central Bank seen holding rates, for now – Reuters

The European Central Bank faces intense pressure to cut interest rates on Thursday but is unlikely to buckle, waiting instead to see whether a dive in inflation is sustained.

Draghi Weighs Whether Rate Cuts Too Valuable as ECB Meets – BB

Mario Draghi must decide whether it’s time to use up one of his remaining interest-rate cuts.

Walk tall, speak softly and carry a big stick Mario – TradingFloor

Strongly vigilant? – MacroScope / Reuters

No policy change is likely, and “sources familiar” are already talking down the threat of deflation… expect Mario Draghi to indulge in some robust verbal intervention

Draghi’s forward guidance critical for EURUSD direction – TradingFloor

Euro weakness relieves Draghi of the need to act – TradingFloor

The recent euro weakness relieves Draghi of the need to take action, verbal or otherwise. No rate cut is expected.

NOV-5

Timing and tools are uncertain, but more ECB easing is likely – Nordea

We now expect a 25 bp refi rate cut in December, a clearly dovish tone at this week’s meeting, and liquidity will remain ample

ECB preview: inflation top of the agenda – Danske Bank

ECB Preview: Market high on hopes, but will it only get promises? – TradingFloor

Euro zone economy turns corner, but growth, inflation subdued – Reuters

NOV-4

The ECB’s easing dilemma – FT

Given the overnight market rate is already as close as possible to the ECB’s zero rate corridor floor, it is the levels of market liquidity and forward rates that are likely to determine how easy eurozone monetary conditions are, including the euro’s exchange rate

Europe’s Inflation Problem – Krugman / NYT

Eurozone: ‘Fear of the D-word’ – Handelsblatt / Presseurop

NOV-3

Banks Point to ECB Rate Cut Next Week – WSJ

Pressure Grows on ECB To ‘Do Something’ – WSJ

EARLIER

ECB expected to cut the refi rate in December – Danske Bank

  EURO STRENGTH

Positive net capital inflows boost EUR – TradingFloor

Eurozone net capital flows continue to provide a solid backdrop to the EUR at a time when international investors are increasing their allocations to Europe.

Euro area Viewpoint: The strong euro matters – Nordea

Since the summer of last year, the euro has gained some 10% in value against the USD, and around 8% in nominal and also real trade weighted terms. This is clearly reflected in foreign trade data.

Euro Gains Seen as ECB Bank Test Sparks Repatriation: Currencies – BB

The euro, which reached a two-year high versus the dollar this month, is poised to extend its gains as the ECB’s audit of the region’s financial system encourages lenders to repatriate overseas assets.

This is your euro on AQR – FT

  DEFLATION THREAT

‘Sharp euro zone inflation drop, record joblessness add to ECB conundrum – Reuters

Euro zone inflation dropped sharply to nearly four-year lows in October and unemployment stuck at record highs in September, increasing pressure on the European Central Bank to do more to protect economic recovery.

Europe heads towards disinflation – TradingFloor

There is a major a shift in European economic data indicating that Europe is heading towards disinflation, which from a policymaker's perspective is the worst of all evils in economics. Europe now has less inflation than Japan. Japanisation is ahead.

Lower oil prices and stronger euro push inflation down to 0.7% - Nordea

Or read the summary

Draghi on the edge of deflation – FT

The Credit Suisse European economics team are growing concerned about Mario Draghi’s disinflation problem:

BANKING SYSTEM

FI Viewpoint – LTRO update – Nordea

Last week, excess liquidity fell below the EUR 200bn level for the first time since 2011. This is around the levels below which the volatility in the overnight rate used to increase and EONIA could start climbing towards the refi rate. With year-end coming up, the LTROs approaching one year to maturity, and the Asset Quality Review and stress test in focus ahead of next year, we could see continued large repayments and front-end EONIAs moving higher.

Press release October 2013 euro area bank lending survey – ECB

An encouraging start for the ECB’s Big Bank Review – Bruegel

Thus, the conflict between the ECB and member states will escalate. It is likely to trigger significantly more financial-market volatility in 2014 than Europe has witnessed (so far) in 2013, in spite of sizeable internal shocks this year such as the February election in Italy and the March developments in Cyprus, and external ones such as the turmoil in emerging markets and the recent US fiscal drama.