• In a relatively light and overall mixed data week, the big-3 central bank meetings attracted premier attention, with Draghi staying in the spotlight again. As expected, the ECB left rates unchanged and did not pre-announce any imminent action. While leaving the door open for a rate cut, today's news on unconventional measures was pretty mixed.
  • The ECB showed again its determination to intervene in government bond markets with large purchases, if needed, and to give up its seniority status, but it was less encouraging that the reactivation of the SMP is now conditional on forces that the ECB cannot control, as is the fact that the EBC is only targeting the short end of the yield curve.
  • Therefore, the ECB will now have to identify the specific conditions for other governing groups' actions before it will contemplate interventions to restore the transmission mechanism of monetary policy – and thus ultimately Ieaving more questions than answers.
  • Like the ECB, the Fed as well as the Bank of England stayed on the sidelines in terms of both conventional and unconventional measures. While the FOMC clearly stressed its easing bias so that even a moderate, but jobless recovery would trigger QE3 further down the road, the MPC may come under renewed pressure to step up its efforts, given the disappointing economic figures which were recently released.
  • Next Tuesday, the preliminary estimate of 2Q GDP for Italy will be published, most probably showing some easing in the pace of the recession. In our focus piece, we highlight recent reform efforts addressing Italy's crucial competitiveness problem. We conclude that benefits will not be felt anytime soon, thus expecting only a moderate recovery in Italy's export performance in the near future.