ecb

Can Draghi walk the walk?

We said this morning (Some Hope in Europe) that we saw the ECB as having “the greatest power to elicit some confidence in markets”, but were not expecting that to happen quite so soon. The London sunshine (a rare thing) and the Olympic torch passing through the City of London (an even rarer thing) seem to have given the ECB President a renewed vocal vigour during his visit here. He pledged that the ECB “would do whatever is needed” to preserve the single currency.
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26/07/2012 @ 14:10 GMT

The pressure from banks

In an otherwise muted morning session for currencies, the euro was nudged a little lower on the latest data from the ECB showing the on-going fall in lending to businesses and households. Compared to the same time a year ago lending is down 0.2% YoY and on this measure lending has contracted for a second consecutive month. Back at the start of the year it was rising just over 1% YoY and earlier in 2010 by above 3.0%. Of course, the question being asked is whether this fall relates to tougher lending standards from banks or less demand for credit from both households and companies.
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26/07/2012 @ 10:54 GMT

Some hope in Europe

When it comes to financial markets, the ECB is the only true eurozone institution with any real power, which is why it has carried such a burden of expectation through the sovereign crisis. The meltdown in peripheral markets seen early in the week was reversed through yesterday’s session, helped by comments from ECB member Nowotny hinting of the possibility of giving the permanent bailout mechanism (the ESM) a banking license. This matters because it would allow the ESM to increase its firepower by borrowing funds from the ECB.
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26/07/2012 @ 07:33 GMT

Whiplash

Suddenly, just when all seemed so calm in currency markets, the mood twisted violently. Not surprisingly, it was the single currency that was again in the dock yesterday, sinking to a low of 1.2364 from above 1.25 earlier in the day. European policy-makers ought to be incredibly disappointed by the price action, and over the past couple of days especially. In effect, the euro has given back all and more of the boost it received after last Friday’s more positive than expected EU Summit announcement.
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06/07/2012 @ 07:15 GMT

Draghi’s ‘first’ ECB rate cut

His first two easings (November and December last year) were merely unwinding the mistaken rate increases undertaken by his predecessor earlier in 2011. It’s just a shame that it took so long to get to this stage. Beyond the anticipated 0.25% cut in the key benchmark rate (to 0.75%), the ECB also cut the deposit rate to zero, the amount that banks are remunerated for parking funds overnight at the ECB. Deposits have remained high, seen as a reflection of the continued reluctance of banks to lend to each other, rather than lend to the wider economy or each other.
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05/07/2012 @ 13:52 GMT

Testing time

Although yesterday’s underlying trading volumes were adversely affected by the US Independence Day holiday, nevertheless there was an attempt by some participants to seek out the pain threshold of other players. For most of the day the euro probed for stops around the 1.2550/1.2560 level, only to meet determined buying interest. The latter eventually evaporated, with the euro quickly sliding to a low of 1.2513. The mood towards the single currency was not helped by some more weak economic data in the form of service sector PMIs and eurozone retail sales.
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05/07/2012 @ 07:08 GMT

ECB and the euro

The foundations for an ECB rate cut at tomorrow’s meeting look to be firmly in place. Firstly, the ECB President let it be known last month that some members of the Governing Council voted for a rate cut. This is a level of clarity not afforded by the previous incumbents, even though we don’t get data on the numbers or the members’ voting patterns. Secondly, the summit of EU leaders last week made more progress than was generally anticipated.
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04/07/2012 @ 10:18 GMT

A German mystery

Notwithstanding the worsening financial calamity that is southern Europe, noticeable over the last couple of weeks is that both Angela Merkel and her Finance Minister Schaeuble have been less prominent than might have been expected.
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14/06/2012 @ 06:24 GMT

No easy escape for Italy

Not unlike last night’s match in the first round of the European football championships, it is hard to separate the financial perils endured by both Italy and Spain at the present time. The former has an eye-popping government debt mountain worth 120% of GDP, which with 10yr yields at 6.0% is becoming very expensive to finance. As noted by the head of Italy’s debt agency last week, foreign investors have been shunning Italy’s regular debt auctions this year, with the result that the government was becoming increasingly reliant on domestic investors.
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11/06/2012 @ 13:05 GMT

The skies darken once more

Risk aversion has set in once more on the final trading day of the week, triggered in part by reports that Spain may apply for outside assistance for their battered banks as soon as this weekend. According to a couple of news agencies, there is talk of a eurogroup conference call on Saturday to discuss this and a number of other matters. The IMF has estimated that some EUR 50bn is required to recapitalise Spain’s banks, above the EUR 40bn that Budget Minister Montoro was floating earlier in the week.
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08/06/2012 @ 12:40 GMT