Investors get too comfy over US-euro divergence

November 19, 2015

Twin the prospect of higher U.S. policy rates with the chance of more euro zone easing and the result is eye-catching divergences in currency and interest rate markets. The problem is, such price trends are vulnerable to setbacks even if rate-setters do what’s expected of them.

Uncertain central bankers leave markets stranded

October 16, 2015

Investors can’t get a straight story on when interest rates will rise, or why. And they’re not sure whether delay is good or bad for stocks. So markets behave capriciously. In the murk, one thing is becoming painfully clear – the diminishing effectiveness of all monetary policy.

Cult of central bank transparency is too powerful

May 26, 2015

Rate-setters around the world are in a bind. The zeitgeist demands they share every twist and turn of their deliberations. But too bright a light can be blinding. Hard talk is often best done in private. While some transparency is good, more is not always better.

ECB torn between two roles in Greek bank support

March 20, 2015

The central bank’s monetary policy wing has delayed a plan by its supervisory arm to legally stop Greek banks increasing their stocks of illiquid assets. The stability-searching supervisors have the right idea. But the policy group has an even higher political responsibility.

EU insurers’ solvency is shakier than it looks

December 16, 2014

A quarter of Europe’s insurers would fail to meet a basic gauge of capital health if Japan-style low-yield conditions were to persist, recent stress tests found. But actual euro zone yields are even lower. With the bloc on the brink of deflation, that’s not a reassuring sign.

Draghi can only dream of moving like BOJ’s Kuroda

October 31, 2014

The ECB chief might fantasise about taking big decisions with a one-vote margin, as the Bank of Japan leader just did. But realpolitik requires a goodly majority. The euro zone’s inevitable compromises complicate Draghi’s fight against stubbornly low inflation.

ECB’s trillion-euro race may start slowly

September 17, 2014

A first round of liquidity injections this week will test Mario Draghi’s attempt to fight deflation in the euro zone. A small take-up could increase pressure for more ambitious sovereign debt purchases. But the ECB has time, and several ways to boost its balance sheet as planned.

Euro has further to fall

September 5, 2014

The single currency has dropped sharply since the ECB eased policy this week. The central bank now openly hankers for a weaker euro to boost inflation, and is doing all it can to bring this about. Traders sometimes fight central bankers. This time they look happy to go along.

Cash calls misstate likely EU bank equity deficit

July 3, 2014

The first half of 2014 saw a spate of European bank share sales ahead of stress test results this autumn. It would be wrong to conclude that all the new equity will go to plug a capital hole. Some lenders are being preemptive, some are just cautious.

Central banks abet the complacency they fret about

June 4, 2014

Monetary policymakers worry that today’s torpid markets carry the seeds of tomorrow’s torrid moves. They’re right to worry, but the problem is of their own making. Cheap money is making investors complacent, so they underestimate the risk of big adverse price swings.