Focus will be on the ECB’s asset quality review and stress test, which were releasedyesterday. Overall, we expect a muted positive reaction, as capital shortfalls were lessthan expected, ECB comprehensive assessment: Capital shortfall less than expected,27 October 2014.
The European banking sector will get additional attention, as bank lending and moneysupply figures are due for release. We expect the lending to non-financialcorporations to show a continued decline in the pace of deleveraging.
German IFO expectations are expected to be unchanged in October. Although theGerman PMI increased in October, the upside risk should be limited, as historysuggests we need to see a period of smaller declines or stabilisation before the indexmoves higher again and we have not seen this yet.
During the rest of the week, focus will be on the Fed meeting, where the ‘considerabletime’ forward guidance is likely to be reiterated. In the euro area inflation is set toincrease to 0.6% y/y in October from 0.3% y/y in September. The Swedish Riksbankis expected to cut the policy rate by 15bp to 0.10% and to present a significantlyflatter rate path.
Read the full report: FX Daily