Euro Compared To A Diamond
ECB Executive Board member Coeuré said the euro is as solid and long-lasting as a diamond (given empirical evidence suggests otherwise, Coeuré’s resort to metaphor here is perhaps understandable). He also dropped some hints about the future course of monetary policy, implying that settings will be left unchanged for quite some time to come. Inflation risks are now balanced in his view, and he seemed in no hurry to adjust liquidity provision to the banking system (his opinions on the latter are especially noteworthy given Coeuré has overall responsibility for ECB market operations). Meanwhile, Minneapolis Fed President Kocherlakota is now a fully-fledged member of the dovish camp at the Fed, having gradually abandoned his hawkish views over the past few months. Overnight he said he strongly disagrees with the view that Fed policy is too easy and that, if anything, settings are still too tight given the forecasts for low inflation and high unemployment. Kocherlakota expressed optimism that a political solution will be found so that the US fiscal cliff can be averted in time − both he and Bank of Canada Governor Carney have now made their views clear on the matter although other policymakers have mostly maintained their silence. On Greece, Thomas Wieser, head of the Eurogroup’s “Working Group”, said that troika negotiations with Greece are close to reaching a conclusion. He ventured that Greece could ultimately receive more time to implement reforms, but insisted that a Greek debt writedown is not under discussion. On Wednesday, Norway will decide on policy rates but our European economists expect no change.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank