LONDON, May 3 (Reuters) 13.04 – The euro pared gains while German Bund futures edged up on Friday after European Central Bank policymaker Ewald Nowotny said the central bank was open-minded about taking deposit rates into negative territory.
Nowotny said he was “astonished” by the market’s reaction to his comments earlier in the day, when he said negative deposit rates were not relevant in the near term.
“Oh, Hollande…” said Mario Draghi as the rest of us wondered if he had or hadn’t entered the supposed currency wars. Or if, in fact, the question was redundant.
The euro’s dive on Thursday was impressive and clearly the result of ECB president Draghi’s comments after the ECB’s rate setting meeting. But whether it was justified or not is very much contested. Read more
On the one hand they can send an immensely powerful message. On the other hand they have the power to seriously and dangerously disrupt core economic mechanisms by magnifying the physical hoarding incentive — this helps to create a negative feedback loop that ultimately crowds out capital and leads to voluntary capital destruction. Read more
On Thursday, ECB president Mario Draghi was in Milan to give a speech at Università Bocconi. It’s a charming read, as the policymaker reviews the eurozone crisis in pleasantly digestible terms even by Friday morning standards.
Once the crisis was underway, and sovereign spreads had widened out, a debate started: Read more
The market has been waiting for Spain to request its very own Enhanced Conditions Credit Line for quite a while now. It’s the road to OMT. And for a (very) little while just last week while it appeared we were only a weekend away.
But it’s now looking increasingly like we are not gonna get to see any OMT buying at all in 2012. Sad. Read more
Draghi-day is getting a big lead-up. Markets just jerked (and then came back a fair bit) on the back of another tid bit. From Bloomberg (with our emphasis):
European Central Bank President Mario Draghi’s bond-buying proposal involves unlimited purchases of government debt that will be sterilized to assuage concerns about printing money, two central bank officials briefed on the plan said. Read more
So, we are days from finding out what the ECB is planning to do… or at least, days away from knowing more than we do now.
But immediate largesse in the bond market isn’t the only bit of help that should be concentrated on. There is still Spain’s bank-bailout to consider and where its costs should ultimately lie. Read more
From the ECB’s perspective, a strong economic union is an essential complement to the single monetary policy. Building this will require a structured process with correct sequencing. Yet citizens can be certain that three elements will remain constant. The ECB will do what is necessary to ensure price stability. It will remain independent. And it will always act within the limits of its mandate. Read more