ECB: getting the credit

Despite the challenges of deflation, the ECB looks to have been relatively successful in easing monetary conditions in the Eurozone. Credit conditions have continued to thaw and there has been a steady pick-up in demand for loans, including credit for investment. Divergence in borrowing costs among EZ economies and lending rates have diminished too, while M3 growth in real terms is now back at pre-crisis levels.
This combined with QE is a virtuous combination for Eurozone equities. Meanwhile, the Fed’s shift to tightening will reinforce the position of the euro as the premium funding currency. We remain short euro versus the US dollar.

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