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The Swiss National Bank’s decision to leave its deposit rate at -0.75% presumably reflects the slight softening of the franc over recent weeks. But we expect renewed upward pressure on the currency to lead it to cut rates and intervene in foreign exchange …
19th March 2015
The vast amount of spare capacity in the Greek economy means that the underlying state of the public finances is rather better than the headline numbers suggest. But it would be wrong to conclude that the closing of Greece’s output gap will solve its debt …
18th March 2015
The Swedish Riksbank unexpectedly loosened monetary policy further today, citing the deflationary risks from the stronger krona , and said it was prepared to do more if needed. With the ECB’s QE likely to push the krona up against the euro even …
January’s euro-zone trade data suggested that the region’s exports are still not benefitting substantially from the weakness of the euro. … Euro-zone Trade & Construction …
Iceland’s central bank left its main interest rates on hold today as it waits to judge the outcome of the ongoing wage negotiations. But with labour market tensions growing and the Sedlabanki raising its 2015 GDP forecasts, we think that the next move in …
The Swedish Riksbank unexpectedly loosened monetary policy further today, citing the deflationary risks from the stronger krona, and said it was prepared to do more if needed. With the ECB’s QE likely to push the krona up against the euro even further, we …
March’s modest rise in the ZEW investor sentiment index suggests that hopes for the German economy have been tempered by worries over the effects of the Greek crisis. … German ZEW (Mar.) & Euro-zone Employment …
17th March 2015
While France has been given an extra two years to meet its new budget targets set by Brussels, we think that it will still struggle to achieve the necessary fiscal consolidation given France’s prevailing political and economic backdrop. … France will …
16th March 2015
The drop in the euro to a 12-year low against the US dollar should clearly provide some support to both activity and inflation in the euro-zone. But it would be wrong to think that its effects are mechanical or that a weaker currency can solve all of the …
13th March 2015
Q4’s modest rise in Irish GDP appeared to confirm that growth is slowing from the very rapid rates experienced earlier this year, perhaps as statistical distortions have faded. Nonetheless, business surveys point to a continued strong recovery ahead. … …
12th March 2015
The combination of Greece’s renewed problems and the onset of deflation is a very toxic one for the euro-zone. At best, it is likely to keep economic growth in the region fairly subdued. At worst, it could fully re-ignite the crisis and blow the currency …
January’s euro-zone industrial production data suggested that industry had a poor start to 2015, with little evidence of a boost from the weaker euro or lower oil prices. … Euro-zone Industrial Production …
Rising expectations for US interest rates and an escalation of the Greek crisis could push the euro down to parity against the US dollar and beyond. But we expect it to stage a partial recovery in 2016. … How low will the euro …
11th March 2015
The latest data on German wage growth suggest that pay is finally beginning to respond to the long labour market recovery. With deflation offering a further boost to real wage growth, we expect the German consumer recovery to gain pace this year. … Is …
Sweden’s headline inflation rate turned positive in February for the first time in eight months. But deflationary pressures have not disappeared altogether and we continue to think that the Riksbank will need to take additional action in April. … …
Sweden’s headline inflation rate turned positive in February for the first time in eight months. But deflationary pressures have not disappeared altogether and we continue to think that the Riksbank will need to take additional action in April. … Swedish …
Concerns that the ECB will struggle to find enough willing sellers of assets to implement its quantitative easing programme may be wide of the mark. But limits set by the Bank itself imply little scope for the programme to be expanded beyond its current …
10th March 2015
Iceland’s economy continued to expand in Q4, suggesting that the country remains well on the road to recovery. … Iceland GDP (Q4) …
January’s French industrial data support the message from the German and Spanish releases that activity was expanding slowly at the start of the year. But the fall in Italian production suggests that the three-year recession there has continued. … French …
Iceland’s economy continued to expand in Q4, suggesting that the country remains well on the road to recovery. … Iceland GDP (Q4 14) …
As the ECB’s quantitative easing programme starts today, it already seems to be having a more positive impact than we had envisaged. But here we explain why we maintain our view that the policy will neither mark the start of a strong recovery nor …
9th March 2015
President Draghi was sounding rather smug last week as he announced the start of the Bank’s quantitative easing programme and forecast that inflation would rise back to target in the medium term. But we doubt very much that the new policy will prompt a …
6th March 2015
The second estimate and breakdown of euro-zone GDP in Q4 confirmed that the region’s recovery remained very weak at the end of last year but provided some tentative signs that it is becoming better balanced. … Euro-zone GDP Breakdown …
January’s industrial production data suggest that Germany and Spain made a reasonable start to 2015, although there are few signs that the drop in the euro exchange rate is prompting a strong recovery. … German & Spanish Industrial Production …
While ECB President Mario Draghi struck a cautiously optimistic tone today, we doubt that the Bank’s quantitative easing programme will prompt a meaningful economic recovery or eradicate the threat of deflation. Meanwhile, his comments on Greece did …
5th March 2015
Although headline consumer price inflation rose from -0.6% to -0.3% in February, this was driven entirely by a rise in energy prices as oil prices reversed some of their recent falls. Core inflation remained steady at a series low of 0.6% and looks set to …
4th March 2015
The latest euro-zone retail sales data and PMIs provided reassurance that the euro-zone economic recovery continued at the start of the year. … Euro-zone Retail Sales (Jan.) & Final PMIs …
After consolidating their fiscal positions in 2014, the peripheral economies had a mixed start to 2015. Ireland and Italy both fared comparatively well but Portugal and Greece struggled. … Euro-zone Fiscal Monitor …
3rd March 2015
The Swiss economy posted another healthy expansion in Q4, with both net exports and domestic demand continuing to rise. But the franc’s surge since then may well see the economy back in recession before long. … Swiss GDP …
The Swiss economy posted another healthy expansion in Q4, with both net exports and domestic demand continuing to rise. But the franc’s surge since then may well see the economy back in recession before long. … Swiss GDP (Q4 …
February’s continued fall in euro-zone consumer prices and the still-high rate of unemployment in January confirm that the ECB faces an uphill battle against the threat of deflation. … Euro-zone Flash CPI (Feb.) & Unemployment …
2nd March 2015
The markets responded with some relief to last week’s provisional approval by the institutions formerly known as the troika of the proposal advanced by the Greek government for a four-month extension of its bailout. But even if an extension is finalised, …
27th February 2015
February’s energy-related increases in inflation in Germany, Spain and Italy did little to reduce the threat of a prolonged bout of deflation in future. Headline rates remain either extremely low or negative and underlying price pressures are very weak. …
The unexpected surge in Swedish GDP in Q4 confirms that the economy is recovering at a solid pace and reduces the chances of a Japanese-style period of stagnation. But with prices continuing to fall, the Riksbank will still need to do more. … Swedish & …
The ECB is unlikely to announce any new policies after its meeting next week as it prepares to implement the quantitative easing programme unveiled in January. President Draghi will claim that QE is already having a positive impact, even before the bulk …
26th February 2015
January’s euro-zone monetary data showed that credit conditions were healthy at the start of the year, suggesting the ECB’s policy stimulus is already having an effect. … Euro-zone Monetary Indicators Monitor …
February’s EC business and consumer surveys are consistent with slow and steady growth. But even if this can be sustained as the Greek crisis continues, it will do little to erode the spare capacity in the region or to reduce the threat of deflation. … …
The recent sharp drop in the Danish krone back to its central rate against the euro suggests that the Danish Nationalbank has been successful in preserving its currency peg. But the upward pressure on the krone has not disappeared and we think that …
25th February 2015
The recent sharp drop in the Danish krone back to its central rate against the euro suggests that the Danish Nationalbank has been successful in preserving its currency peg. But the upward pressure on the krone has not disappeared and we think that the …
Struggles to implement a foreclosures bill and the associated suspension of the Cypriot bailout highlight that exit risks are not confined to Greece. Admittedly, the risk of a near-term “Cyxit” is relatively low. But if Greece abandons the euro, Cyprus …
24th February 2015
In this Update , we analyse the latest agreement between Greece and the Eurogroup to assess how much ground the two sides have won on the key issues. It is clear that Greece has made huge concessions, which its Parliament might not endorse. And even if …
23rd February 2015
February’s smaller-than-expected rise in the German Ifo index may be an early sign that businesses are worried about the wider effects of the Greek crisis. … German Ifo Survey …
The idea that Greece could introduce a parallel domestic currency to improve its competitiveness while still honouring its international debts is not the solution to the country’s problems. Indeed, if Greece goes down this route, it will effectively have …
20th February 2015
The risk of a Grexit has risen further still this week with the positions of the Eurogroup and the Greek Government seeming to be as far apart as ever. Even if a deal is cobbled together at the latest emergency meeting, it will need to be ratified by …
February’s small rise in the euro-zone composite PMI provided some reassurance that the region’s recovery may have continued in the first quarter of 2015 despite the ongoing crisis in Greece. … Euro-zone Flash PMIs …
The first ever publication of ECB minutes confirmed that support for the new QE programme was not unanimous, suggesting that its scale will remain limited. The account, together with the Bank’s decision on emergency funding for Greek banks, added to signs …
19th February 2015
The French Government’s decision yesterday to force its reform package through the lower house of Parliament showed a welcome political commitment to implement growth-boosting measures. But the bill has already been watered down and does not include more …
18th February 2015
As negotiations over Greece’s bailout stalled last night, the two sides seemed as far apart as ever. A deal still seems possible, but it might require a time-consuming Greek referendum. And in the meantime, the ECB could pull the plug on Greek banks, …
17th February 2015
