ECB & BOE pre-meeting notes (BOE: 50/50 - but I think they cut) - ECB (Nothing - but weaker growth forecast) - Impact: BOE wud surprise - ECB will be hard to support negative trend unless Draghi goes really defensive.

 

Both ECB and BOE is like an Boeing 747 running out of runway to take off….They have bought politicians so much time with no reciprocity on reforms that their transmission channels and future guidance is all clogged up.

 

Italy is a classic example of being given more time – and when pressure subsides then the electorates say 57% no to austerity and EU – even more to the point less than 10% of the Italians supported the plan in place as Monti was the election big losers. France and Spain have both asked for “more time”…..

 

This leaves Draghi exposed as he his OTM is in danger with Italy theoretically being in non-compliance if they ask for access to ESM.

 

It will unlike ECB to pre-empt, rather they need to card later if Italy starts spinning out of control – on economic Germany is improving markedly – leaving Draghi some room to talk “about some emerging growth”…if he wants to. In my opinion Draghi main concern now is: Italy and the lack of reciprocity of politicians on reforms.

 

Bank of England – With new incoming management there seems a move towards “more rather than less” – even the outgoing governor now supporting higher level of QE(despite his earlier reservations). When minorities are formed in BOE they generally lead to consensus later, so BOE doing more is only about whether it will happen today or at the next meeting.

 

The FT piece this morning is clearly leaked on purpose – Treasury wants any potential change to the mandate to be done ahead of Carney’s arrival on July 1^st. Bottom line: BOE is going full in US style inside the next two meetings.

 

 

OVERALL:

 

ECB:

 

ECB: No change  (Consensus: only 5 in 61 survey economist sees cut)

 

Economics: More down side seen after Q4 confirmed negative 0.6% - Present mid-ragne growth is -0,3% - I see new forecast of -0.5%  (In this context

 

Q&A: OTM vs. Italy, LTRO (less payment means more “friction”?), EUR-level

 

BOE:

 

BOE: 50/50 chance on increased size of QE after both King and Fisher votes for last time. Consensus is now for more even inside BOE, it’s now only matter of when. Bottom line: Could surprise.

 

Economics: Slightly worse outlook.

 

Press Release: Will likely mention the continued lack of credit and potentially the need and necessity of more monetary easing.

 

 

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