* Short-term rates inch higher after Draghi speech
* Markets still discounting ECB rate cuts in 2012
* Bets may pile up again if Spanish, Greek worries remain
By Marius Zaharia
LONDON, June 6 (Reuters) - Short-term euro zone interest rates rose slightly on Wednesday after the European Central Bank failed to flag it was ready to ease monetary policy, but markets are still pricing in a large probability the bank will cut rates later this year.
The ECB kept its refinancing rate unchanged at a record low of 1 percent and the deposit facility at 0.25 percent and President Mario Draghi warned his bank cannot make up for other institutions' lack of action.
This disappointed markets, which had expected him to at least send out a signal that more easing was forthcoming.
"From the tone of it, as of today we cannot expect any significant measure in July because he looked very defiant and imperturbable - the ball is very much in the court of the politicians," BNP Paribas rate strategist Matteo Regesta said.
However, rate cut bets have not been taken off completely.
Regesta estimated that the forward overnight euro zone interbank EONIA rate markets - which moved 1-3 basis points higher across the 2012 curve after Draghi's speech - was still pricing in 24 percent probability that the deposit facility rate will be slashed in half in July.
For the end of the year, a December EONIA of just over 23 basis points discounted a 66 percent probability of that happening, compared to some 80 percent at the end of last week.
Euribor futures also sold off a few ticks after Draghi's speech, implying expectations for higher fixings of three-month Euribor rates in the future.
The December Euribor contact was 3 ticks lower on the day and also compared with levels seen earlier in the session at 99.43, implying a 0.57 percent Euribor fixing in the last month of the year versus Wednesday's 0.663 percent.
After May's ECB meeting, which also disappointed markets waiting for more central bank easing, the December contract sold off to as low as 99.29, but it was bought back in the past few days as rate cut bets have been put back on the table.
Analysts say the same thing could happen next month if the conditions that led to speculation the ECB could cut interest rates on Wednesday are still in place.
Tensions over Spain's stricken banking sector are rising and the risk that Greece could leave the euro zone after its June 17 election is perceived as high. This is hampering business sentiment and growth potential even in the euro zone's powerhouse Germany, as shown by recent data, strengthening the case for the ECB to act.
"(A rise in ECB easing bets) could happen again, it depends on developments in Spain - if they get help, how large recapitalisation needs for the banking system are," said Commerzbank rate strategist Benjamin Schroeder.
"Also there is no clear indication what the outcome (of the Greek election) would be."
"VERY DYSFUNCTIONAL"
Moody's cut the credit ratings of six German banking groups and Austria's three largest banks on Wednesday, giving a glimpse of how far the ramifications of a potential Greek exit from the euro zone might go.
Banks more than tripled their uptake of ECB dollar funding on Wednesday, the latest indication that some are finding it increasingly hard to source cash in the market.
Traders say three weeks is the longest period for which most banks are willing to lend in cash markets, and that's only to a select group of counterparties, also because they are dressing their books for the half-year turn.
In his post-meeting remarks, Draghi himself described interbank markets as "very dysfunctional".
Finance leaders report demands on the 'finance function' are increasing further - Director of Finance online
Finance leaders report demands on the 'finance function' are increasing further.
Finance Leaders are bucking the current trend for negativity on the economic outlook with over 60% of attendees at PwC's Finance Leaders' Summit expecting positive growth in their industry over the next 12-18 months.
The summit, which was held in London by PwC for CFOs and finance leaders from 98 multi-national companies, also touched on how the emerging markets continue to be important for growth.
Top locations were identified as China followed by Brazil, India, the US and Russia.
As the push for growth in new markets continues, an increasing importance is placed on understanding local requirements and demand with 90% of attendees saying they were increasingly moving away from simply exporting products towards developing products and services that are modified to meet local market needs.
Nick Atkin, partner in PwC Consulting's Finance Effectiveness practice said:
"In today's competitive economic landscape and global marketplace, it is no longer enough to export your home-grown products and services. Understanding the opportunities and risks in the local target market and innovating to develop tailor-made products and services is pivotal to success in the emerging markets."
When looking at business in the emerging markets, 60% of finance leaders cite finding and retaining the right talent as the key consideration for their function, followed by compliance and regulatory control risk.
Talent issues remain a concern for finance functions also when doing business in their own countries. Whilst 89% of finance leaders said that the demands on the finance function have increased over the past year, an overwhelming 92% of attendees reported gaps within their existing finance talent base to be able to effectively deliver against the business strategy - with more than a quarter saying those gaps are significant.
Nick Atkin, PwC partner, continues:
“Finance leaders are increasingly focusing on talent management, on attracting and retaining the right talent and on developing the skills of their teams. As organisations grow and expand internationally this is a top priority for business leaders today."
The drive for finance to become a partner of the business and driver of strategy as opposed to a department of report churners seems to continue unabated. Over half of the finance leaders believe that finance should have the responsibility for driving the right data, information and analytics across the business.
Yet a quarter of the respondents stated that the management information produced by finance failed to meet the needs of the business, with a further 37% only neutral about its impact.
Nick Groves, PwC partner and global leader of the enterprise performance management team said:
"Far too much time is still spent on manipulating data rather than on analysing information to deliver insightful solutions. Whilst finance leaders clearly recognise the importance of their role in driving the right data, significant opportunity remains in aligning management information to the needs of the business."
Whilst adding insight and maintaining control are clearly high on Finance Leaders' agendas, continuing to strive for an efficient organisation is still an important balancing act. 70% of Finance Leaders' said that they are now considering a move towards multi-functional shared services, with Finance, IT, HR and Procurement functions being the top candidates. This generates significant benefits to organisations yet also creates certain complexity
Nick Atkin, PwC partner, concluded:
"Organisations continue to look to drive efficiency across the support functions and deliver high quality services to internal customers freeing up time for finance leaders to support more effective decision making. With more free time, finance can focus on putting information at the heart of the organisation to drive better outcomes, growth and prosperity for the business, its employees and shareholders."
Forex Flash: EUR/USD breaking downtrend channel – Commerzbank - FXStreet.com
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