- The ECB left its QE plan unchanged and only said it may increase them.
- Several tweaks in its policy are insufficient to convince investors.
- EUR/USD has significant room to fall, especially if spreads continue widening.
The European Central Bank has had its say – by leaving the bond-buying program unchanged, far from what is needed. The ECB has disappointed investors and the euro may suffer. The Frankfurt-based institution left the PEPP bond-buying scheme unchanged at €750 billion and only said it is ready to increase it and let it run through the year-end. That is insufficient amid the rapid pace of deploying funds and the gravity of the situation, as data has shown.
The ECB announced the Pandemic Emergency Purchase Program (PEPP) in an emergency meeting on March 18 and the money is running out fast. The bank's front-loading – to alleviate investors' fears about government funding issues – implies that funds will run out around October.
Earlier, eurozone Gross Domestic Product figures were grim. The Italian economy shrank by 4.7% in the first quarter the Spanish economy shrank by 5.2%, and the French one by 5.8% – the worst contractions since Word War II. As a whole, the euro area's output plunged by 3.8%, worse than expected, and is still prone to revisions once Germany's data is out. Moreover, there is no doubt that the second quarter will be far worse.
PELTROs: The ECB did announce a serious of tweaks, including easing lending conditions to banks on condition of them borrowing them to the real economy. One of the new programs is called pandemic emergency longer-term refinancing operations (PELTRO). This new addition to the bank's alphabet soup is only a minor change and far from enough. The bank also failed to pledge that it would enlarge the program in June when staff release new forecasts.
The verdict in debt markets is swift – the spread between Italian and German bonds is rising as investors are disappointed.
-637238453355344143.png)
Growing funding pressures by hard-hit countries may exacerbate the falls in EUR/USD. Targets include 1.0850, 1.0810, and 1.0770.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
AUD/USD edges higher to 0.6000; bulls lack conviction amid US-China trade war concerns
AUD/USD holds above its lowest level since March 2020 touched the previous day and trades with a positive bias around the 0.6000 mark during the Asian session on Tuesday. A stable performance around the equity markets, following the previous day's tariffs-inspired volatile swings, support the risk-sensitive Aussie amid subdued USD price action.
USD/JPY stalls its recovery from multi-month low; remains below 148.00
USD/JPY oscillates around the 148.00 mark during the Asian session on Tuesday amid mixed cues. A modest recovery in the global risk sentiment, along with receding bets that the BoJ would raise the policy rate at a faster pace, undermines the safe-haven JPY.
Gold price moves away from multi-week low; looks to reclaim $3,000
Gold price edges higher during the Asian session on Tuesday and now seems to have snapped a three-day losing streak to a nearly four-week low touched the previous day. Concerns that a trade war will hit the US economy and trigger a recession, along with mounting bets for more aggressive rate cuts by the Fed, cap the USD recovery.
Trump tariffs shake crypto markets, where are Bitcoin and meme coins headed?
Bitcoin and altcoin prices were on a rollercoaster ride on Monday as traders digested the developments surrounding tariffs. From speculation of a 90-day pause on tariffs to Bitcoin’s price swinging from a $74,500 low to $81,200 high within a single day, the crypto market meltdown has been an event for traders.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.