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"The inflation momentum is simply too strong for the ECB to pause," Danske Bank economist Piet Haines Christiansen said. In contrast, markets have fully priced in unchanged rates at next week's meeting of the U.S. Federal Reserve, which started raising rates earlier and has moved higher than the ECB. "We doubt that this will be possible and expect that a decision to hold rates steady today would mark the end of the tightening cycle." The euro zone's biggest economy, Germany, is bearing the brunt of an industrial slump and heading for recession, according to several forecasts. ECB President Christine Lagarde will hold a news conference at 1245 GMT.

Persons: Piet Haines Christiansen, Dirk Schumacher, Christine Lagarde, Catherine Evans Organizations: ECB, European Central Bank, Reuters, Danske Bank, U.S . Federal Reserve, Services, Thomson Locations: FRANKFURT, Germany

The central bank for the 20 countries that share the euro faces a dilemma. "The inflation momentum is simply too strong for the ECB to pause," Danske Bank economist Piet Haines Christiansen said. Just 14 months ago, that rate was languishing at a record low of minus 0.5%, meaning banks had to pay to park their cash securely at the central bank. The euro zone's biggest economy, Germany, is bearing the brunt of an industrial slump and heading for recession, according to several forecasts. On Thursday, the ECB is also expected to cuts its growth projections for this year and next, leading some economists to argue it should hold off from raising rates this month.

Persons: Piet Haines Christiansen, Dirk Schumacher, Catherine Evans Organizations: ECB, European Central Bank, Reuters, Danske Bank, Services, Thomson Locations: FRANKFURT, Germany

☆ Analysis: With central banks' job half done, global inflation talk is shifting
▼ + stars: | 2023-08-23 | by ( Balazs Koranyi | ) www.reuters.com time to read: +6 min

"It may just be lucky that a global demand slump or non-policy related domestic forces are driving inflation lower." This disconnect led the German central bank to issue a warning to peers this week that a tough task may still lie ahead for policymakers. "The impression took hold that inflation rates will nonetheless persist for longer above the rates targeted by central banks," the Bundesbank said. Indeed, longer-term inflation expectations for the U.S. and the euro zone remain above the banks' 2% targets. But even in the best case, weaker growth will reduce demand for imports and complicate the global outlook.

Persons: JACKSON, Steve Englander, Piet Haines Christiansen, Philip Lane, Lane, Niels Graham, Julian Evans, Pritchard, Balazs Koranyi, Dan Burns, Toby Chopra Organizations: Standard Chartered, The Bank of England, ECB, Reserve Bank of Australia, Reserve Bank of New, Danske Bank, U.S, People's Bank of, Atlantic Council, Capital Economic, Thomson Locations: , Wyoming, Jackson Hole , Wyoming, Britain, Australia, New Zealand, German, Europe, Reserve Bank of New Zealand, Jackson, People's Bank of China, China

☆ Analysis: Greek bonds snapping at heels of southern Europe's best in class
▼ + stars: | 2023-06-23 | by ( Stefano Rebaudo | ) www.reuters.com time to read: +5 min

The country has received three international bailouts from the euro zone and the IMF worth 280 billion euros ($308 billion) since 2010. "The Greek (bond) market is not so liquid and tends to be more volatile, but we have a lot of good news. The Greek economy is still heavily exposed to volatile sectors like tourism or shipping, but it is less sensitive to manufacturing headwinds. The premium, or spread, of Greek government bond yields over those of Spain recently fell to its lowest since 2008 at around 27 basis points . Across southern Europe, only Portugal and Spain trade at a smaller premium to Germany - the euro zone benchmark - than Greece.

Persons: Athanasios, Kyriakos Mitsotakis, Goldman Sachs, Filippo Taddei, Piet Haines Christiansen, Giorgia Meloni, Mario Draghi's, Christoph Rieger, Stefano Rebaudo, Sara Rossi, Amanda Cooper, Hugh Lawson Organizations: Bank of America, Democracy, Analysts, European Recovery Fund, Danske Bank, Italy's, ECB, Italian Treasury, Reuters, Thomson Locations: Greece, Spain, Europe, Portugal, Germany, European, Italy, Italian

The survey's flash services sector PMI rose to 53.7, the highest reading in a year, from 52.6 in March. Economists polled by Reuters had forecast the services PMI falling to 51.5. Flash PMIIn the euro zone, the bloc's dominant services industry saw already-buoyant demand rise too, more than offsetting a deepening downturn in manufacturing. However, the manufacturing PMI fell to 45.5 from 47.3, its lowest since the coronavirus pandemic was cementing its grip on the world three years ago. "The PMI sheds a positive light on the economic performance in the euro zone, as a pickup in service sector activity is boosting growth," said Bert Colijn, senior euro zone economist at ING, noting manufacturing weakness remained a concern.

Summary ECB signalled 50 bps hikeMarkets doubt its resolve and price 25 bpsFinancial turmoil seen derailing rate hike plansInflation to stay above target through 2025FRANKFURT, March 16 (Reuters) - European Central Bank policymakers are meeting on Thursday amidst turmoil in financial markets that could force it to divert from plans for another hefty interest rate hike even though inflation remains too high. Now the ECB must reconcile its inflation-fighting credibility with the need to maintain financial stability in the face of overwhelmingly imported turmoil. Complicating its task, the central bank for the 20 countries that use the euro currency has essentially already committed to a 50 basis point increase on Thursday. Money market pricing suggests that investors now see just a 30% chance of a 50 basis point increase, down from as high as 90% early on Wednesday. The peak ECB rate, also known as terminal rate, is now seen at only around 3.25%, down from 4.1% last week, an exceptional reversal in market pricing.

"That would be a problem for any central bank." TUG OF WARLagarde's commitment also puzzled ECB-watchers because the central bank had previously said it wouldn't make such public predictions - known as forward guidance - anymore, but instead take each decision based on incoming data. This of course leads to a tug of war between the ECB and the markets on the narrative," he added. ING's Brzeski said the ECB lacked a clear thought-leader on its Governing Council who could steer markets like Lagarde's predecessor, Mario Draghi. "The cacophony of diverging voices and the lack of clarity on who is the leading voice keeps hurting the ECB," Brzeski said.

☆ Stocks buoyant while darker forecasts gather on the horizon
▼ + stars: | 2023-01-02 | by ( Nell Mackenzie | ) www.reuters.com time to read: +4 min

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.06%, just short of an index of global shares, which climbed 0.16%. The pan-European STOXX 600 index (.STOXX) climbed 0.6%, retracing little of the nearly 12% it lost in 2022, bludgeoned by central banks' aggressive monetary policy tightening. Elsewhere, the dollar edged almost 0.2% higher against a basket of major currencies, while the pound and euro fell 0.4% and 0.2% respectively. The benchmark 10-year yield climbed around 27 basis points (bps) last week and over 200 bps last year, ending 2022 around 3.88%. Germany's 10-year bond yield fell 8.4 bps to 2.47%, after hitting its highest since 2011 at 2.57% on Friday.

☆ Stocks edge higher as darker forecasts loom
▼ + stars: | 2023-01-02 | by ( Nell Mackenzie | ) www.reuters.com time to read: +4 min

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.04%, just short of an index of global shares, which climbed 0.21%. "Europe is taking the latest round of PMIs well enough, as the final readings help to confirm the view (hope?) DOLLAR STRUGGLING TO MAINTAIN STRENGTHElsewhere, the dollar edged almost 0.1% higher against a basket of major currencies, while the pound and euro fell 0.4% and 0.3% respectively. Germany's 10-year bond yield fell 13 bps to 2.43%, after hitting its highest since 2011 at 2.57% on Friday. Reporting by Nell Mackenzie Additional reporting Dhara Ranasinghe Editing by Mark Potter and Barbara LewisOur Standards: The Thomson Reuters Trust Principles.

☆ Dollar edges up at start of new year but sentiment frail
▼ + stars: | 2023-01-02 | by ( Dhara Ranasinghe | ) www.reuters.com time to read: +3 min

It has weakened recently as markets bet a U.S. Federal Reserve tightening cycle may be nearing an end and sentiment remained fragile. The dollar index, which measures the value of the greenback against a basket of other major currencies, was trading up around 0.16% at 103.65 - off roughly six-month lows hit last week at around 103.38. Against the yen, the dollar was a touch softer at 130.94 , having hit its lowest levels since August last month. "There is an attempt by the dollar index to pull higher today but we do see that it is losing a good part of the strength it gained last year," said Ulrich Leuchtmann, head of forex research at Commerzbank. That Fed tightening helped lift the dollar index 8% last year in its biggest annual jump since 2015.

Headline inflation slowed in November for the first time in 1-1/2 years, to 10%, raising hopes that sky-high price growth has passed. ECB President Christine Lagarde will likely be careful about calling a peak after last year's "big mistake" of insisting surging prices were "transitory," said Pictet's Ducrozet. ECB Chief Economist Philip Lane reckons wages would be a "primary driver" of price inflation even after energy price shocks fade. Closely-watched business activity data points to a mild recession and latest forecasts should show how the ECB views the coming slowdown. Lane believes record price growth will start to subside next year.

LONDON, Oct 27 (Reuters) - Germany, considered Europe's most reliable debtor, is having trouble selling its bonds, just as it seeks billions to tackle the energy crisis. Hit hard by its over-reliance on Russian energy, Germany intends to borrow particularly large amounts in the coming years, with Parliament last week voting to suspend the constitutional debt brake that limits new borrowing. France's finance agency, in contrast, issued 10 billion euros of medium term bonds on Oct. 20 into strong demand. VOLATILITY HURTS AUCTIONSThe uncertainty around borrowing and QT has increased volatility in euro zone bond markets, already rocked by the knock-on effects from Britain's now-scrapped plans for large unfunded tax cuts. Volatility is deterring the banks that act as dealers for German bonds from bidding in debt auctions, Tammo Diemer, head of the country's finance agency, said at an event on Tuesday.

The ECB, which bought 5 trillion euros of bonds ($4.9 trillion) over the past decade to lift low inflation, now finds itself battling record high inflation at 10%. "This consideration also makes the practical implementation of ECB QT significantly harder," BofA said. That would reduce its balance sheet by a "manageable" 155 billion euros in 2023 and 300 billion euros in 2024, ING reckons. An eventual wind-down of PEPP holdings could add to balance sheet reductions in 2025 worth a total 388 billion euros, ING said. AllianceBernstein portfolio manager Nick Sanders said he was "sceptical" how the ECB could achieve QT with those protections in place.

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