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On the face of it, Germany seems more exposed than France to the effects of the UK leaving the EU. But in the time before the UK actually leaves the single market, France is more vulnerable than Germany to a downturn in sentiment arising from growing …
1st July 2016
May’s fall in euro-zone unemployment shows that the labour market is slowly recovering. But employment growth may already have peaked and there is still too much slack to generate any meaningful wage growth or inflationary pressure. … Euro-zone …
Recent market movements point to a downturn in euro-zone growth, particularly in the periphery. The ECB is likely to respond by loosening monetary policy, but it cannot solve all of the euro-zone’s ills. … Market moves could destabilise the euro-zone …
30th June 2016
June’s rise in euro-zone CPI inflation into positive territory might mark the start of an upward trend, but we see little hope of inflation hitting the ECB’s target over the medium term. … Euro-zone Flash CPI (Jun.) & German Retail Sales …
Italian opposition to the EU is strong and several forces could cause that hostility to grow. October’s constitutional reform referendum will provide voters with an opportunity to oust the prime minister, potentially leading to a general election in which …
29th June 2016
June’s increase in German inflation back into positive territory may well mark the start of an upward trend. But even in Germany, we do not think that inflation is on track to reach the ECB’s near 2% target on a sustained basis. … German Flash CPI …
June’s fall in euro-zone business and consumer confidence suggests that the euro-zone economy was slowing even before the UK voted to leave the EU. … EC Business & Consumer Survey …
While the UK’s vote for Brexit will have only a small direct effect on euro-zone trade this year and next, the indirect effects on confidence and financial markets may be more serious. We have maintained our downbeat forecast of 1.2% GDP growth this …
27th June 2016
Despite unexpected gains for the right in Spain, an anti-austerity left-wing coalition may now be more likely than opinion polls had suggested. Either way, the new government will be a very fragile one. … Spain’s new government set to be a fragile …
May’s euro-zone monetary data suggest that economic growth remains fairly slow. While the ECB has since introduced new stimulus measures, including its latest TLTROs, we doubt that they will boost money and lending growth significantly. … Euro-zone …
The UK’s vote to leave the EU has been followed by calls for referendums in other countries. And , notably, euro-scepticism in some countries seems to be even stronger than in the UK. … Which country might be next to hold an EU …
24th June 2016
The UK’s surprise vote to leave the European Union has put more pressure on the European Central Bank to provide additional policy support. We now expect an acceleration in the pace of the ECB’s asset purchases and perhaps another small cut in interest …
June’s rise in the German Ifo measure of business confidence suggests that the economy continued to grow at pretty healthy rate in Q2. But given the financial market reaction to the UK’s vote to leave the EU, this seems unlikely to last. … German …
The UK’s vote to leave the European Union will have substantial negative effects on the European economy and raises serious doubts over the future of both the EU itself and the currency union. … UK’s vote to leave EU raises doubts over future of …
The ECB’s decision to reinstate a waiver allowing Greek banks to borrow from it at low interest rates will help to ease pressure on the banking sector. But it is very unlikely to generate a lending revival and it could still be some time before Greece …
23rd June 2016
June’s fall in the euro-zone Composite PMI to a 17-month low suggests that strong GDP growth in Q1 was not the start of a more pronounced economic recovery. Indeed, the PMI points to growth slowing sharply in Q2. … Euro-zone Flash PMIs …
The Norges Bank left its key policy rate unchanged today, but with the economy weak and inflation set to fall, we think that further loosening is on the way. … Norges Bank to cut interest rates in …
The Danish krone would probably face significant upward pressure in the event of a Brexit. But as the Danmarks Nationalbank has scope to loosen policy further, a Brexit is unlikely to break its euro peg. … Would Brexit break Denmark’s currency …
22nd June 2016
While the Swiss National Bank (SNB) has vowed to limit any impact on the franc if the UK votes to leave the EU tomorrow, we doubt that it has enough ammunition to prevent an appreciation. We think that the currency would rise towards parity with the euro …
If Spain’s upcoming election returns an anti-austerity coalition to power then there would probably be an immediate rise in government bond yields. But whatever the result, much-needed reforms are unlikely to be enacted, growth will slow and borrowing …
21st June 2016
Today’s ruling by the German constitutional court leaves the ECB free to implement its long-awaited OMT programme, if deemed necessary. And a possible trigger for OMTs – Brexit – might be just a few days away. We think the most likely ECB response to a …
June’s ZEW survey suggests that investor sentiment towards the German economy has not been hit by the risk of Brexit so far and points to steady annual GDP growth. … German ZEW …
Finland’s competitiveness pact probably won’t boost employment by as much as the Government hopes. But it is still a positive move that should help to lower labour costs and boost output. … Will Finland’s competitiveness pact boost the …
17th June 2016
European financial markets have finally woken up to the threat of a Brexit , with stock markets and core country bond yields declining. A UK vote to leave the EU on 23rd June would prompt greater market disruption and force the European Central Bank to …
The immediate risks surrounding Greece have receded once again, with the likely completion of its first review today set to trigger payment of its next loan tranche early next week. But our analysis of the Eurogroup’s debt relief proposals implies …
16th June 2016
The Swiss National Bank (SNB) left interest rates on hold as expected today, but it will continue to intervene in FX markets if needed, as is likely in the run-up to the UK referendum. An actual Brexit would most probably prompt the SNB to cut interest …
The UK is Sweden’s fourth largest export market, but the direct trade impact of a Brexit would probably be small. A Brexit could have a bigger impact on Sweden through its effect on the krona . And further down the line, there could be calls for …
15th June 2016
While the euro-zone trade surplus jumped to a record high in April, any boost from trade to GDP growth in Q2 is likely to be offset by weakness in other parts of the economy. … Euro-zone Trade …
The UK is Sweden’s fourth largest export market, but the direct trade impact of a Brexit would probably be small. A Brexit could have a bigger impact on Sweden through its effect on the krona. And further down the line, there could be calls for Sweden …
Ireland is the most exposed euro-zone country to any economic fallout from a Brexit . But just as we think that the economic costs of a Brexit for the UK are often overstated, we think that the Irish economy’s medium-term prospects would still be …
14th June 2016
Despite April’s strong rise, industrial production is still lower than it was in January. With industrial surveys pointing to subdued growth ahead, it seems unlikely that the euro-zone industrial sector will match Q1’s strength in Q2. … Euro-zone …
Sweden’s inflation rate fell by more than expected in May. With underlying price pressures still largely absent, the Riksbank may well need to take further policy action. … Swedish Consumer Prices …
Sweden’s inflation rate fell by more than expected in May. With underlying price pressures still largely absent, the Riksbank may well need to take further policy action. … Swedish Consumer Prices (May …
There are hopes that Euro 2016 will provide a boost to the French economy and perhaps lift national sentiment. But any gains in football-related expenditure will be at least partly offset by falls elsewhere. And while a successful football performance …
10th June 2016
April’s increases in French and Italian industrial production support the message from Germany that the sector had a decent month. But growth still looks set to slow in Q2 and over the rest of the year, keeping the pressure on policymakers to provide …
The prospect of ECB corporate bond purchases, which begin today, has pushed corporate bond spreads down and prompted a pick-up in issuance. However, there are several reasons to think that spreads might rise after bond purchases begin. And the increase …
8th June 2016
Iceland’s second consecutive quarterly fall in GDP was down to the volatility of trade. The big picture is that domestic demand growth picked up and the outlook is positive. … Should European markets be more worried about …
7th June 2016
Iceland’s second consecutive quarterly fall in GDP was down to the volatility of trade. The big picture is that domestic demand growth picked up and the outlook is positive. … Iceland GDP …
Today’s final estimate of Q1 GDP confirmed that the economy got off to a strong start to the year, driven by household spending. But the economy is unlikely to expand as quickly throughout the rest of this year. … Euro-zone GDP Breakdown …
April’s rise in German industrial production only partially reversed the previous month’s fall and suggests that the strong growth of industrial and overall economic activity in Q1 will not be repeated in the second quarter. … German Industrial …
Iceland’s second consecutive quarterly fall in GDP was down to the volatility of trade. The big picture is that domestic demand growth picked up and the outlook is positive. … Iceland GDP (Q1 …
The recent rise in oil prices will provide some short-term support to the Norwegian economy, but the associated strengthening of the krone will hinder the economy’s rebalancing away from oil. We expect the Norges Bank to cut interest rates further …
6th June 2016
The recent rise in oil prices will provide some short-term support to the Norwegian economy, but the associated strengthening of the krone will hinder the economy’s rebalancing away from oil. We expect the Norges Bank to cut interest rates further this …
The expansion of the ECB’s QE programme may have contributed to the recent increase in euro-zone equity prices and economic sentiment. But purchases of government bonds have increased by more in the region’s core than in the periphery, suggesting that …
3rd June 2016
April’s euro-zone retail sales data suggest that strong consumer spending growth in Q1 is unlikely to be repeated in Q2, and thus that GDP growth will slow. Indeed, May’s final Composite PMI also points to a slowdown in growth. … Euro-zone Retail Sales …
The recent increase in Target2 imbalances does not suggest that the euro-zone is set for another crisis on the scale of 2011/12. However, it does suggest that countries in the core might be experiencing more of the benefits of QE. If anything, this is the …
