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The further rise in the euro against the US dollar, in the face of speculation that a euro-zone country might default on its debts in the foreseeable future, might seem to indicate that the single currency is a safe one-way bet. We certainly would not …
25th April 2011
April’s Ifo survey added to the recent tentative evidence that the super-strong German economic recovery is starting to come off the boil a little bit. … German Ifo Survey …
21st April 2011
The flash euro-zone Purchasing Managers’ Index (PMI) for April confirmed that economic activity in the region as a whole is still defying the continued problems in the periphery. … Euro-zone Flash PMIs …
19th April 2011
Hopes that a Portuguese bail-out would mark a major turning point in the euro-zone’s sovereign debt crisis took a blow last week as comments from euro-zone officials led to renewed concerns about possible debt restructuring in the periphery. This prompted …
18th April 2011
March’s rise in headline euro-zone CPI inflation, which was down to a pick-up in core inflation, is not as alarming as it may seem. But it will do nothing to ease the ECB’s concerns about building price pressures in the region. … Euro-zone CPI (Final, …
15th April 2011
February’s euro-zone industrial production figures provide tentative signs that the recovery in the sector is starting to lose momentum. … Euro-zone Ind Prod. (Feb …
13th April 2011
Worries that the euro-zone debt crisis will enter a more dangerous phase by spreading from the smaller peripheral economies to Spain have recently diminished. But we think that it would be premature to conclude that Spain has put its troubles fully behind …
12th April 2011
April’s fall in the headline German ZEW index does little to alter our view that the German economy will continue to grow at a pretty robust pace over the coming months. … German ZEW …
Last week’s decision by the ECB to raise interest rates before other major central banks mainly reflected its different attitude and approach to inflation-targeting. But we suspect that there were presentations aspects to the move too. At least one more …
11th April 2011
Having raised interest rates from 1.0% to 1.25% as expected, the ECB kept its options open over the likely size and timing of future interest rate increases. For now, we still think that the Bank will raise interest rates more gradually than the markets …
7th April 2011
February’s German industrial production figures confirm that the economy’s impressive expansion has continued in the early months of 2011 and that Germany remains the euro-zone’s best performing economy. … German Industrial Production …
Now that Portugal has succumbed to the inevitable, the key question is whether the latest euro-zone bail-out finally draws a line under the peripheral economies’ problems or marks the start of a new, more dangerous phase of the region’s debt crisis. We …
We doubt that the probable ECB interest rate hike on Thursday marks the start of an aggressive policy tightening. But if interest rates were to rise in line with market expectations, their impact would be greatest in the periphery and may prompt a further …
6th April 2011
March’s pick-up in euro-zone CPI inflation from 2.4% to 2.6%, combined with signs that pipeline price pressures may be building, has led markets to become increasingly convinced that April’s likely interest rate hike will be one of a series. In response, …
5th April 2011
Last week’s major euro-zone data releases will have done nothing to ease the ECB’s fears about inflation. March’s rise in headline CPI inflation will be particularly worrying, given that it may have been down to a pick-up in the core component. But even …
4th April 2011
Despite the surge in Portuguese government bond yields, politicians continue to insist that they will not require a bail-out. But these words can quickly be taken over by events. A quick look at Portugal’s cash balance and coming borrowing needs suggests …
31st March 2011
The recent batch of reasonably encouraging data, coupled with a raft of hawkish comments from various Governing Council members, suggests that the ECB will go ahead with its plan to raise interest rates in April. But the key issue will be whether …
The results of the latest round of Irish bank stress tests will almost undoubtedly make pretty grim reading and we doubt that they will draw a line under the banking crisis. Accordingly, concerns about a future Government debt restructuring are unlikely …
March’s euro-zone inflation figures increased the likelihood that next week’s ECB rate hike will not be a one-off. But the weakness of underlying price pressures in the region suggests that a major tightening of monetary policy is not required. … …
March’s fall in the EC measure of business and consumer sentiment provides some tentative signs that the euro-zone recovery may begin to slow before too long, suggesting that an April rate hike by the ECB may not be the start of an aggressive monetary …
30th March 2011
Public finances data for February revealed a familiar picture, with Spain leading the way with respect to its fiscal tightening plans while Greece continued to lag behind. … Euro-zone Fiscal Monitor …
29th March 2011
The latest German CPI inflation numbers are unlikely to provide the ECB with a great deal of comfort. Accordingly, it remains virtually inevitable that the Bank pushes ahead with its April interest rate hike. … German Flash CPI …
Increased concerns that one or more peripheral euro-zone countries may default on their debts have so far had remarkably little impact on the value of the euro. But there are reasons why the currency may not remain so immune. … Why are default concerns …
28th March 2011
Concerns that one or more peripheral euro-zone economies will default on their debts have intensified over recent weeks. With the Portuguese situation and uncertainties over the permanent crisis mechanism set to rumble on, these concerns look more likely …
The latest euro-zone money and credit data confirm that underlying inflationary pressures remain reasonably subdued. While the ECB appears intent on raising interest rates next month, the money data support the view that aggressive interest rates hikes …
25th March 2011
The recent surge in government bond yields, coupled with ongoing concerns about the banking sector and prospects for economic growth, suggest that Ireland may need to gain a bigger bail-out package before too long. And even this may not prevent Ireland …
24th March 2011
The fall of Portugal’s Government makes it even more likely that the country will follow Greece and Ireland in accepting a bail-out. But it may also add to the growing concerns over the prospect of debt restructurings in the euro-zone and further …
March’s small fall in the euro-zone composite PMI does little to alter the view that the economy made a strong start to 2011 and that the ECB will push ahead with its planned interest rate hike in April. … Euro-zone Flash PMIs …
Portugal seems very likely to become the third peripheral euro-zone country to need a bail-out. But it also faces much greater challenges if it is to overcome the deep-seated structural problems which have held back the economy for the last ten years and …
22nd March 2011
Details on the methodology and assumptions behind this year’s European bank stress tests provide little hope that the results will significantly ease concerns about the region’s banks. This supports the view that the euro-zone fiscal crisis is still far …
21st March 2011
Recent events in Japan and the sharp fall in euro-zone equity prices mean that an interest rate hike by the ECB in April is now less certain. For now at least, we continue to think that the Bank will raise interest rates next month. But even if it does …
Despite growing domestic price pressures, the Swiss National Bank left its interest rate target at 0.25% at today’s meeting. While the Bank’s tone was a bit more upbeat than expected, the inflation forecast remains subdued, supporting our view that …
17th March 2011
February’s final euro-zone CPI inflation figures revealed that the rise in the headline rate was once again down to energy and food. With core inflation still very subdued and global concerns building, we still think that the ECB will raise interest rates …
16th March 2011
Contrary to prior expectations, Portugal was not pushed into accepting a bail-out at this weekend’s euro-zone summit. Instead, the “Euro Pact” and Portugal’s announcement of new fiscal measures eased the pressure on it to do so. Still, these developments …
15th March 2011
March’s small fall in the headline German ZEW index suggests that investor sentiment might be starting to ease in response to the ECB’s increasingly hawkish stance and global concerns. But this does nothing to alter our view that the near-term prospects …
Measures announced by European leaders late last Friday to try to resolve the region’s fiscal problems have provided the markets with a boost. But the measures are not as far-reaching as had been hoped for a couple of months ago and are unlikely to mark …
14th March 2011
January’s euro-zone industrial production data suggest that the sector has made a reasonably solid start to the year. Nonetheless, they add to evidence that the wider economy has grown at a slower pace in Q1 than the business surveys have suggested. … …
Expectations for the EU summit to discuss the latest policy proposals to tackle the euro-zone debt crisis have fallen so far that the scope for disappointment in the near term may be limited. Nonetheless, growing political resistance in a number of …
The Italian and Portuguese Q4 GDP expenditure breakdowns add to evidence that the divergence in economic growth between the northern and southern euro-zone economies is unlikely to narrow significantly any time soon. … Italian & Portuguese GDP (Breakdown, …
11th March 2011
Recent financial market developments suggest that Greece is as far away as ever from convincing investors that it can get its public finances on a stable footing without defaulting. What’s more, there appears to be a growing risk that Greece could …
9th March 2011
January’s sharp rise in German industrial production adds to evidence that the recovery in the sector and the wider economy still has plenty of momentum and that Germany will remain the euro-zone’s main engine of growth in 2011. … German Industrial …
Q4’s renewed contraction in Icelandic GDP is a reminder that the economy will struggle to sustain a decent recovery. While the end of the Icesave saga provides some signs of hope, we doubt it will significantly alter the grim outlook for the economy. … …
8th March 2011
This week’s EU summit to discuss the so-called “Grand Bargain” of policy proposals to tackle the euro-zone debt crisis already had a lot riding on it. But last week’s strong indication from the ECB that it is about to withdraw some of its own policy …
7th March 2011
The ECB gave a crystal clear signal today that it has already made the decision to raise interest rates in the near future. We have pencilled in quarter-point hikes in rates in both April and July. … ECB signals April rate …
3rd March 2011
The second estimate of euro-zone Q4 GDP provides some welcome signs that the economic recovery in the region is becoming a little more broad-based. But there are still good reasons to think that the recovery could falter later this year. … Euro-zone GDP …
February’s sharp rises in the surveys of euro-zone business sentiment are an encouraging sign that the region’s fiscal squeeze is not yet having a severe impact on business confidence. This, coupled with growing evidence that the external sector recovery …
2nd March 2011
The apparent impasse between the ECB and Germany over the purchase of peripheral government bonds not only makes it very likely that Portugal will have to accept a bail-out but also questions the policymakers’ ability to prevent the debt crisis from …
Most of the peripheral euro-zone governments made some progress towards getting their public finances under control in 2010. But those economies are set for another painful squeeze this year and markets remain sceptical as to whether the likes of Greece …
Well over a year into the euro-zone debt crisis, policymakers still face enormous challenges if they are to prevent the region’s problems from continuing to escalate. On current evidence, it is far from clear that they have the conviction and means to …
1st March 2011
