http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/http://www.fxstreet.com/fundamental/http://mediaserver.fxstreet.com/images/fxstreet-provider-logo1-en.gif7http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2011-02-10.htmlLast week, EU leaders failed to shape a common view on the comprehensive package that should lay the foundation for a new, more credible eurozone. Policymakers will get another chance, apparently on 11 March, before the crucial gathering on 24-25 March. However, even a successful agreement at the end of March will not come close to taking the issue of sovereign debt restructuring off the table. We provide a mapping of the proposals currently debated with respect to increasing the EFSF’sThu, 10 Feb 2011 20:52:19 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2011-02-10.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2011-01-25.htmlYesterday, Finance Minister Salgado announced a new recapitalization plan for cajas. This is a welcome step as the government eventually seems to address the main vulnerability that threatens sovereign solvency: a negative feedback loop between banking sector woes and government debt. However, the program details fall short of what markets had been expecting in terms of recapitalization costs and plan timeline. Salgado said that the Bank of Spain currently estimates that potential needs toTue, 25 Jan 2011 11:49:28 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2011-01-25.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-11-19.htmlTensions in the eurozone periphery are back in full swing, but growth expectations at the area-wide level have been hardly affected by the recent turmoil. This is due mostly to the fact that broad financial market conditions remain supportive for GDP growth, while the euro continues to work as an automatic stabilizer and weakens at times of rising risk aversion (and vice versa). We review the current phase of the credit recovery and elaborate on the latest available information to refine ourFri, 19 Nov 2010 04:36:45 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-11-19.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-09-16.htmlWe identify the magnitude of the shock to global GDP that would derail the capex and labor market recovery in the eurozone. A 1pp slowdown in global growth vs. our baseline scenario would induce a shallow capex recession in 1H 2011, with employment managing to hold up in slightly positive territory next year. Global GDP would need to be around 3pp weaker than expected to trigger a significant capex recession and a double-dip in the labor market, a scenario that we deem as quite unlikely. AsThu, 16 Sep 2010 17:12:15 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-09-16.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-07-20.htmlEurozone GDP likely rose strongly in 2Q, by at least 0.6% qoq. The rebound mostly reflects an export-driven surge in IP, while construction activity bounced back after the cold winter. Private consumption remains the weak spot. GDP growth should slow substantially in 2H, probably to 1% annualized, but the risk of a double-dip recession is low. While we await results of the stress test to be published on 23 July, we elaborate on recent dynamics of aggregated balance sheets of the eurozoneTue, 20 Jul 2010 15:58:30 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-07-20.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-06-15.htmlSix months after the publication of our 2010 Outlook, we provide an assessment of the track record of our main macro calls. We did a good job on GDP and CPI, where our current projections are very similar to the ones outlined at end-2009. Sovereign debt woes and fiscal tightening did not materially change the picture for growth and inflation, mostly because the euro worked as an automatic stabilizer and depreciated sharply since the beginning of the year. The impact on monetary policy,Tue, 15 Jun 2010 17:56:43 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-06-15.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-05-13.htmlWe change our ECB call to reflect the deepening of the sovereign debt crisis that pushed the central bank to buy government bonds outright and extend the provision of unlimited liquidity to banks. We now expect the ECB to remain on hold for most of 2011, with the beginning of the tightening cycle in 4Q of next year vs. our previous forecast of a first hike in March 2011. This lower trajectory for the policy rate doesn’t reflect a more dovish set of GDP/CPI projections, but the view that theThu, 13 May 2010 17:40:42 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-05-13.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-04-20.htmlThe rebalancing process within the eurozone might not be an easy task, as Germany imports very little from those countries which are most in need of reducing their C/A deficits, and these imports consist mainly of low value-added consumer goods. While an increase in German consumption ultimately boosting imports would benefit the peripherals, it would not be enough to bring them back to growth. An effort is thus needed to improve their competitiveness and to rebalance the structure of theirTue, 20 Apr 2010 17:18:15 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-04-20.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-03-23.htmlThe recent tensions in sovereign debt markets have strengthened the view that public finances for eurozone countries are not the only concern, and that imbalances in the growth model of any given country need to be taken seriously into account. In an environment where credit has rapidly become scarcer and more expensive, the size of the current account (C/A) deficit – which measures the net external borrowing position – may be an important indicator to gauge the vulnerability of a country.Tue, 23 Mar 2010 10:41:49 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-03-23.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-03-18.htmlWe remain comfortable with our “moderate recovery” story. Weak GDP at end-2009 and still contracting domestic demand vindicate our cautious growth forecasts. 1Q GDP is a tricky call, with a weather-related drag on construction and stronger-than-expected IP momentum offsetting each other. We stick to our view that GDP will be up 1% qoq annualized in the first quarter, and 0.9% on average this year. 2011 is still seen at 1.3%. Recent tensions in the sovereign debt market have strengthenedThu, 18 Mar 2010 18:46:22 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-03-18.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-02-10.htmlWe expect 4Q 2009 GDP to be reported at 0.3% qoq, a moderate loss of momentum after the 0.4% posted in 3Q. A slowdown in industrial activity accounts for most of the likely GDP deceleration. The pace of recovery will probably remain moderate at the beginning of the year. Recent years have witnessed a substantial leveraging of eurozone households. While this undoubtedly increased their vulnerability to income shocks, the outlook could be characterized by very prudent optimism, as householdsWed, 10 Feb 2010 18:57:43 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2010-02-10.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-12-10.htmlIn the global section of this outlook, we show that inflation in developed economies shouldn’t become an issue for at least the next couple of years. Economic fundamentals, particularly a weak labor market, leave little room for upside CPI surprises in the near term. Prospects for 2011 are less clear, but the inflation outlook should remain benign as the recovery proves only moderate and liquidity affects prices with a long lag. We remain cautious on eurozone GDP prospects, because signs ofThu, 10 Dec 2009 06:15:15 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-12-10.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-11-12.htmlThe ECB is ready to announce how its exit strategy will look like. So far, we only know that the December 12-month LTRO will be the last one. We expect – and we explain why – a surge in the allotment from the September's EUR 72bn. Moreover, we think the ECB will drop the 1M and 6M LTROs at the beginning of next year and will retain full allotment for the weekly MROs. If we are right, the EONIA should trade around current levels until (at least) July 2010. A strong IP performance pulled theThu, 12 Nov 2009 14:46:26 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-11-12.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-10-16.htmlAfter five quarters of contraction, eurozone GDP will resume growing in 3Q. We see GDP up 0.4% (with risks for an even stronger outcome), which we consider to be broadly in line with the area’s growth potential after the crisis. The industrial sector leads the way up, as the export revival and inventory rebuilding leave their mark. However, GDP should decelerate already in 4Q and for 2010 we confirm our 0.8% forecast. Euro appreciation increasingly looks like a threat to the recovery. TheFri, 16 Oct 2009 08:31:42 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-10-16.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-09-17.htmlSustainability of the recovery is what central bankers around the world want to see before starting to reduce monetary accommodation. In this respect, business investment is the key variable to monitor, as it represents the link between an export and policy-led recovery and a more sustainable growth dynamic that involves the labor market. This issue of the Euro Compass therefore has a strong focus on investment. The bottom line of our analysis is that fundamentals point to further capexThu, 17 Sep 2009 14:25:45 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-09-17.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-07-09.htmlThe G-8 meeting hosted in Italy has, unfortunately, evidenced again divides on stimulus measures and on possible exit strategies to be implemented once the crisis is over. Especially, disagreement among European countries is particularly worrisome: further lack of coordination on exit strategies would be particularly harmful and may sow the seeds of future imbalances and of a sizeable drop in eurozone potential growth. Evidence that the eurozone supply-side of the economy has stronglyThu, 09 Jul 2009 14:05:33 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-07-09.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-06-10.html■ The updated June ECB staff forecasts came in mildly on the dovish side, and imply that the ECB does not see a return to positive growth before mid-2010, with inflation undershooting price stability throughout the forecast horizon. The fact that, against this rather gloomy background, the ECB stated that rates are “appropriate” clearly indicates that it has no appetite for further rate cuts, especially at a time when the economy finally appears to be turning around. We believe that the ECBWed, 10 Jun 2009 14:13:53 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-06-10.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-05-13.htmlIn the first quarter of 2009, the euro area experienced the worst downturn ever. After the gloomy March IP numbers, we have revised our Q1 GDP forecast to -2.3% q-o-q, with some downside risks. Again, investment and exports were the key drivers of the contraction whereas the decline in consumption was presumably relatively contained. Incoming evidence suggests that in Q2 the pace of recession should slow substantially: we keep seeing GDP at -0.6% q-o-q with probably some small upside risks.Wed, 13 May 2009 14:58:07 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-05-13.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-04-15.htmlWhile some signs of growth stabilization have recently emerged at the global level, it will take several months before a sound recovery can be detected at the horizon with any degree of confidence. Moreover, the upturn will materialize sooner in the US than in the eurozone, as fiscal stimulus in the euro area seems insufficient to kickstart a domestic consumption hobbled by rising unemployment and weak morale. A recovery in the eurozone, therefore, depends on a recovery in the rest of theWed, 15 Apr 2009 08:03:05 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-04-15.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-03-12.html■ For the first time since December 2005, at the March meeting the ECB has anticipated markets with out-of-consensus projections. But after disastrous January IP figures across the area’s major economies, we are afraid that their 2009 GDP forecast is already outdated. We have just reviewed our baseline scenario and now see GDP shrinking 3.5% in 2009 – with the first quarter even worse than Q4 2008 – and resuming a tiny +0.1% in 2010. Headline inflation will average 0.5% this year and 1.3% theThu, 12 Mar 2009 16:45:31 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-03-12.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-02-10.html■ In Q4 2008, eurozone GDP will experience the most severe contraction of the euro area history. In the wake of disastrous IP numbers across the area, we decided to lower our call to -1.3% q-o-q. In Q1 2009, the pace of recession will remain deep, though probably not as bad as in Q4 (our forecast is -0.8% q-o-q). GDP should contract by 2.1% in 2009. ■ In January, inflation slowed to 1.1% from the prior 1.6%. We focus on the role of food inflation and find that it is one potential source ofTue, 10 Feb 2009 14:34:38 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2009-02-10.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2008-12-11.html● 2009 will be the Annus Horribilis of the euro area. Next year the single currency area will suffer a deep recession, with only a moderate recovery towards the end of the year. However, growth will remain well below potential throughout 2010. The ECB will lower rates until 1.00% next year. ● Inflation is back at the forefront, but this time not because it’s too high but because it risks being too low, dangerously close to deflationary territory. Deflation is not our baseline scenario, butThu, 11 Dec 2008 13:39:54 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2008-12-11.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2008-11-12.html● The euro area is in a recession that risks being deep and prolonged, while inflation is collapsing. All the fiscal and monetary policy tools need to be employed to take the economy out of the woods. ● Anyway, the 2009 outlook is already jeopardized and we are revising down our growth forecast for next year to -0.7%. Fixed investment and net exports will be the main drag on GDP, whereas private consumption should remain marginally above the zero line mainly thanks to an acceleration in realWed, 12 Nov 2008 15:39:51 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2008-11-12.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2008-10-10.htmlThe winds of recession we portended last month have transformed in a full-blown storm spreading across the continent. No banking system and no economy appears safe, and it is now common belief that a recessionary scenario is in the cards also for the euro area.  Over the last few weeks, we have witnessed a massive and broadbased downward revision of growth and inflation forecasts. Our (already) gloomy scenario makes no exception. Next year, eurozone growth will be miserable and inflationFri, 10 Oct 2008 07:30:35 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2008-10-10.htmlhttp://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2008-09-09.html● A wind of recession is blowing across Europe. In the euro area, after the Q2 contraction, the third quarter started on a very weak footing. Weakness is spreading across aggregate demand: scant consumption and export growth are bound to take a severe toll on investment, also hit by the construction slowdown. The economy will stop just short of a technical recession and we now see GDP growing 1.3% in 2008 and 0.8% in 2009.  ● Headline inflation will continue to ease in the coming months,Tue, 09 Sep 2008 15:11:16 GMThttp://www.fxstreet.com/fundamental/analysis-reports/communication@unicreditgroup.eu (UniCredit Group)http://www.fxstreet.com/fundamental/analysis-reports/euro-compass/2008-09-09.html