European Central Bank (ECB) Vice President Luis de Guindos said on Wednesday that the “risks to growth are still tilted to the downside.”
“The economic recovery is to strengthen over time,” the ECB official added.
Market reaction
The Euro is little affected by these above comments, as EUR/USD trades better bid near 1.1070, as of writing.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
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
EUR/USD treads water above 1.1050 amid cautious markets
EUR/USD is trading with caution above 1.1050 on Wednesday's European morning. The pair remains undermined by sustained US Dollar strength, in the face of the Middle East conflict and pre-ADP data nervousness. Speeches from ECB and Fed policymakers will be also eyed.
GBP/USD stays depressed below 1.3300 on tepid risk sentiment
GBP/USD stays depressed below 1.3300 in European trading on Wednesday. The cautious trading could be attributed to risk aversion due to the rising geopolitical tensions in the Middle East, which underpins the safe-haven US Dollar at the expense of the risk-sensitive Pound Sterling.
Gold pulls back toward $2,650, focus shifts to US data, Fedspeak
Gold pulls back after Tuesday’s rally on increased geopolitical risk stemming from Iran’s escalation in the Middle East. The macro backdrop remains positive, however, with falling interest rates globally making Gold shine. Eyes turn to US ADP data, Fedspeak.
XRP open interest skyrockets as Ripple tests its stablecoin RLUSD
Ripple has generated interest among derivatives traders as the payment remittance firm tests its stablecoin Ripple USD. Ripple announced that the asset is awaiting regulatory approval and is geared toward institutions, not individuals.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.