- Central bank speakers back in the driving seat as Draghi sets out less
accommodative ECB stall, and markets digest Yellen comments; Italy CPI,
US Goods Trade Balance & Pending Home Sales accompany raft of ECB, BOE
and BOC speakers; US 7-yr sale and food/agri sector earnings also in
view
- Draghi laying out ECB stall very clearly, Fed comments underline
concerns about asset prices
- Italy CPI: first out of the stalls this month, but seen little changed,
Spain and Germany CPI tomorrow seen slowing further
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** EVENTS PREVIEW **
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steals a march on Germany, Spain and France in publishing the first June CPI reading in the Eurozone, which also sees the release of M3 and associated credit aggregates, while the US has the advance Goods Trade Balance, Pending Home Sales and Wholesale Inventories. The ECB's Sintra Central Banking Forum has Draghi, BoE's Carney and BoC's Poloz along with some ECB speakers on its various panels today, while elsewhere Lautenschlaeger speaks at a BaFin symposium. The US rounds off this week's refunding exercise with a re-opening of the current 2-yr FRN and a new 7-yr Treasury Note, while General Mills and Monsanto feature on the earnings schedule. While Italy is stealing a march on the rest of the Eurozone, it is in forecast terms the least interesting, with national CPI and HICP both expected to be unchanged in yr/yr terms, while elsewhere base effects are likely to drive a big drop in Spanish HICP to 1.5% from 2.0% y/y and a more modest dip in Eurozone CPI to 1.2% from 1.4%. One can certainly observe that Draghi's comments yesterday about deflationary forces being replaced by reflationary ones as effectively leaning against any temptation by markets to push back on ECB tapering in reaction to lower inflation readings this month. There are also the various comments from Fed officials to digest with Ms Yellen opining that another financial crisis is not likely "in our liftetimes", stressing that while asset price values were rather stretched, bank balance sheets were much stronger and leverage remains low. By contrast SF Fed's Williams suggested that US equity markets were running "on fumes", and arch dove Kashkari suggested that while another financial crisis is not imminent, 'we need to prepare for stupidity because stupidity is going to happen'. Whatever one might think of what the Fed and ECB have done in policy terms over the past 8 years, it has to be said that both central banks are making it very clear to markets that the era of extreme accommodation is over, and are communicating their policy paths very clearly. By contrast the Bank of England is clearly very divided, with deputy governor Cunliffe this morning sending rather mixed signals, ostensibly backing Carney by saying this was not the time to raise interest rates, but also noting "(We) do have to look at what's happening to domestic inflation pressure, and I think that on the data we have at the moment, gives us a bit of time to see how this evolves" - 'a bit of time' being the key observation.
from Marc Ostwald
