ECB to highlight inflation downside

January 21, 2016

The European Central Bank is expected to keep all interest rates on hold at 1245 gmt but highlight increasing growth and inflation risks, raising the prospect of further policy easing later this year, possibly at its June meeting. Meeting for the first time since it cut rates and expanded its asset purchase programme in December, the ECB is expected to warn that inflation could stay ultra-low longer than an already downbeat forecast pegged on plunging oil prices, weak Chinese growth and the lack of decisive fiscal policy action at home. It will also be interesting what Mario Draghi has to say about turmoil in the bank sector with shares in Italian, Portuguese and Greek lenders plunging on concerns the ECB may eventually force them to take a loss on some of their bad loans, reducing their ability to pay dividends. The press conference is at 1330 GMT.
Nearly a decade after the murder of Kremlin foe Alexander Litvinenko with a cup of green tea laced with Polonium-210, an rare isotope mainly produced in Russia, the British inquiry into his death is due to give some answers at around 0930 GMT.  To what extend was the Russian state involved? And if so, did the order come from the Kremlin’s own former KGB agent in chief Vladimir Putin? Any finger-pointing in the direction of the Kremlin will increase diplomatic pressure on the British government to confront Moscow on the affair; however wider geopolitical prerogatives, among them the need to keep Russia on board in the international push for an end to the conflict in Syria, may tone down any reaction.
Meanwhile his 1300 GMT speech at Davos is the perfect forum for David Cameron to urge business to get behind his push for Britain to remain in a “reformed” EU. So far, some companies have been reluctant to stick their neck on the line either way for fear of annoying clients or staff, but there will be greater readiness to do so once reform negotiations have been concluded, possibly as early as next month. Goldman Sachs, it emerges, has already put its money where its mouth is and given a six figure sum to the campaign for Britain to stay in the European Union.
Italy’s government is following with concern a rout in domestic banking shares but insists the system is solid. In an interview with financial daily Il Sole-24 Ore, Prime Minister Matteo Renzi rejects the idea that Italy is facing another 2011 style crisis and insists that current events will ease mergers, tie-ups, purchases. Expect more in the same vein from his news conference at 0900 GMT

Reserve Bank of India may cut rates even more than expected this year

January 20, 2016

Reserve Bank of India (RBI) Governor Raghuram Rajan attends a news conference in Mumbai, India, December 1, 2015. REUTERS/Shailesh Andrade - RTX1WLY7

The Reserve Bank of India is widely expected to cut interest rates just once in 2016, as most analysts see retail inflation rising slightly above the central bank’s target, but there is a decent chance it could cut more aggressively, as it did last year.

Canada’s central bank still dreaming of an export recovery

January 19, 2016

Bank of Canada Governor Stephen Poloz looks on during a Canada-UK Chamber of Commerce event in central London March 26, 2015. REUTERS/Stefan Wermuth   - RTR4V02N

The dramatic plunge in the Canadian dollar must surely be a test of optimism, and patience, for Bank of Canada Governor Stephen Poloz.

Has Brazil’s central bank blinked?

January 19, 2016

International Monetary Fund (IMF) Managing Director Christine Lagarde (L) shakes hands with Brazilian Central bank president Alexandre Tombini during a seminar on inflation targets in Rio de Janeiro May 22, 2015. REUTERS/Sergio Moraes  - RTX1E44R

IMF forecasts rarely tell us something we don’t already know about the world economy. The dramatic revision of the Fund’s estimates for Brazil’s economic growth in 2016 and 2017, however brutal, only reflected the sheer pessimism rooted for months among private economists captured in the latest Reuters poll about prospects for the next Olympic host.

MORNING BID EUROPE-BoE’s Carney: a change of tone?

January 19, 2016

Bank of England Governor Mark Carney’s speech at the University of London at midday GMT will be closely watched for how — and indeed whether — he seeks to give more clues on the timing of any interest rate hike. A bold advocate of so-called “forward guidance” aimed at giving market players and investors insight into the central bank’s thinking, Carney’s best efforts have been repeatedly thwarted by the twists and turns of the UK economy. As recently as July, Carney was predicting that a decision on when to raise interest rates would probably become clearer around now, something it has patently not. A new tone of caution may well be discernible.

Hawkish holdout UniCredit joins the rush to push back BoE hike calls

January 15, 2016

Commuters brave the rush hour on the northern line on the London underground in London, Britain August 5, 2015. Londoners face major transport disruption from Wednesday evening as train drivers and staff on the underground rail network walk out for the second time in less than a month. Unions are angry over plans to introduce a new night service from September and weeks of talks with transport bosses have failed to clinch a deal over pay and conditions.   REUTERS/Dylan Martinez  TPX IMAGES OF THE DAY - RTX1N70F

After Bank of England policymakers once again voted 8-1 in favour of keeping British interest rates on hold at a record low, UniCredit just got on board with a carriage full of other major banks and pushed back its call for when the initial rate rise would come.

Argentina’s smooth peso devaluation a rare bright spot in emerging markets

January 13, 2016
A man walks past a currency exchange rates board at a money exchange in Buenos Aires' financial district, Argentina, December 16, 2015. Argentina will announce a much anticipated relaxation of currency controls on Wednesday, the government said, setting the stage for a weakening of the local peso and an increase of soybean shipments from the world's No. 3 exporter.  REUTERS/Marcos Brindicci - RTX1YZQ2

A man walks past a currency exchange rates board at a money exchange in Buenos Aires’ financial district, Argentina, December 16, 2015. REUTERS/Marcos Brindicci – RTX1YZQ2

What to do with Poland

January 13, 2016

Since sweeping to power in October elections, Poland’s Eurosceptic and authoritarian new government has packed the constitutional court with its appointees, skewed the court’s voting system and passed a law tightening its control on top media posts — all in the country supposed to be one of the bulwarks of democracy in east Europe. Today the European Commission will debate what to do with Poland: it is likely for now to hold back from triggering possible sanctions against Warsaw but will discuss ways of subtly increasing the pressure.

A tale of two inflation rates worlds apart: Mexico and Brazil

January 8, 2016
Fans of Mexico ride a big bike as they arrive at the Castelao stadium before Mexico's 2014 World Cup soccer match against Brazil in Fortaleza, Brazil  June 17, 2014.   REUTERS/Sergio Moraes (BRAZIL - Tags: SPORT SOCCER WORLD CUP)

Fans of Mexico ride a big bike as they arrive at the Castelao stadium before Mexico’s 2014 World Cup soccer match against Brazil in Fortaleza, Brazil June 17, 2014. REUTERS/Sergio Moraes

EU vote casts shadow over Britain as 2016 kicks off

January 8, 2016

At this stage, it is hard to quantify how a planned referendum on Britain’s membership of the European Union is impacting investor sentiment and the outlook for business investment. But there is little doubt it will influence the timing of the Bank of England’s first interest rate hike in nearly a decade and how sterling trades this year.