• No change in rate policy or emergency program forecast.
  • Rising COVID-19 cases and potential closures increase pressure for action.
  • Lagarde expected to reassure that the ECB can and will act when necessary.
  • Euro has fallen to near three-month lows.

With COVID-19 cases rising and several countries contemplating new restrictive measures the European Central Bank is again under pressure to support the Union's economy.

Bank President Christine Lagarde will likely promise that she is prepared to ease policy when economic conditions warrant but that a decision is not yet necessary at the meeting on Thursday.

The bank is widely expected to leave its main refinance rate unchanged at 0% and its deposit rate at -0.5%. The ECB's bond purchase program, the Pandemic Emergency Protection Program (PEPP), with only about 500 billion-euros of its allotted 1.35 trillion limit used, should also remain unmodified.

Eurozone economy

Third quarter GDP in the Eurozone is projected to rebound 9.4% after contracting 3.6% in Q1 and 11.8% in April, May and June. Unemployment has been slowly increasing from 7.1% in March to 8.1% in August, the high of the pandemic era, with 8.3% expected for September,.



France, Italy and Spain have already introduced modified restrictions and Germany is preparing to follow, of the type that crashed the economy earlier in the year. Even though most economic limits were lifted in the summer, euro-area services were contracting from the huge declines in travel and hospitality.

Governments will again need to provide economic and business support. Italy approved a new relief package this week and Germany is planning more assistance.

The returning pandemic and potential for re-instituted closures means that a second recession is becoming ever more likely.

The Brexit talks with the UK are another flash-point but with both economies under severe COVID-19 threat neither side will want to risk the additional exactions of a no-deal departure.


Credit markets have been betting that more bond buying by the ECB is on the way. Many expect that the PEPP scheme will be enhanced by another 500 billion euros in December.

German bonds rose on Wednesday sending the 10-year yield to its lowest since the March panic. Italian and Greek yields have also dropped to record lows this month.

Equities have fallen in Europe and the United States. In Europe the FTSE lost 2.55% and the German DAX 4.17% on Wednesday and the Dow and S&P 500 were down 3% in the early afternoon. Japanese and Chinese exchanges saw small gains.

The euro has come under selling pressure this week as the viral spread makes costly preventative measures more likely but it is still well within its1.1630-1.1940 range of the last three months.


The pandemic is a slow moving economic catastrophe. If European governments choose to shut their economies in response to the return of the COVID-19 infections, the result is well-known.

The planners at the ECB and the continent's chancelleries do not have to speculate on the outcome, if their economies are closed they will have a second recession. The only question is how soon they will act. The odds for a surprise preventative strike from the ECB are rising.


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.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

GBP/USD tumbles from the highest since 2018 on the Brexit impasse

The GBP/USD roller coaster continues with a downfall below 1.35 after the pair hit a 31-month high of 1.3539 earlier. Brexit talks have yet to yield an agreement. Negotiations are set to continue through the weekend.


EUR/USD battles 1.2150 after disappointing NFP

EUR/USD is trading off the 32-month highs amid bumps in US stimulus and vaccine distribution. Markets await the all-important US Nonfarm Payrolls missed expectations with 245K jobs gained in November. 


XAU/USD fails to break $1850 and turns to the downside

Gold peaked after the beginning of the American session at $1848/oz reaching the highest level since November 23 and then turned to the downside. It bottomed at $1829 and is it about to end the week hovering around $1830.

Gold news

Dollar downfall explained and what's next for markets

The safe-haven US dollar is hitting multi-month and multi-year lows against its peers while stocks are on fire. What is behind the risk-on rally? Valeria Bednarik, Joseph Trevisani, and Yohay Elam discuss markets' moving parts as 2020 nears its end.

Read more

Extra week of Black Friday!

Learn to trade with the best! Don't miss the most experienced traders and speakers in FXStreet Premium webinars. Also if you are a Premium member you can get real-time FXS Signals and receive daily market analysis with the best forex insights!

More info

Forex Majors