The European Central Bank's (ECB) Governing Council noted that near-term price pressures were expected to remain subdued, the ECB's September Monetary Policy Meeting Accounts showed on Thursday. Key takeaways as summarized by Reuters: "Recovery was asymmetric, being further advanced in the manufacturing sector than in the services sector."
The ECB needs to maintain its ample stimulus to reach its goals, Christine Lagarde said on Wednesday, as reported by Reuters. Lagarde further added that the ECB should guard against premature withdrawal of stimulus and noted that she sees a risk of more divergence in the euro area after the coronavirus crisis.
Reuters reported that the European Central Bank vice president Luis de Guindos said. The ECB does not target the euro exchange rate in its policy, but it is an important variable and the bank monitors it when assessing the effects on price stability.
"We do not target the FX rate" – Christine Lagarde, President of the European Central Bank. These words, alongside a headline saying the ECB prefers to remain calm on the exchange rate, sent EUR/USD toward 1.19. It is uncommon for a central bank to comment on FX – but investors were eyeing such remarks following previous murmurings about the value of the euro.
At its monetary policy meeting held on September10th, the Governing Council of the European Central Bank (ECB) decided to leave the interest rates on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50%, respectively, as expected.
Lagarde has picked the low-hanging fruit – and now needs her political skills to poke policymakers on the fiscal front – without scaring markets, a fine balancing act. The European Central Bank is set to leave its policy unchanged in its July meeting. The Frankfurt-based institution is set to take a break after topping up its Pandemic Emergency Purchase Program (PEPP) with €600 billion in June. This bond-buying scheme – which has fewer constraints than previous ones – now totals €1.35 trillion.
One-two punch – in favor of the euro. Less than 24 hours have passed since German Chancellor Angela Merkel announced a €130 billion stimulus plan, and in Frankfurt, on the other side of Europe's largest economy, another stimulus boost came. The European Central Bank has announced an increase of €600 billion to its Pandemic Emergency Purchase Program (PEPP), and it now reaches €1.35 trillion.
The European Central Bank brought its bond purchase program limit t €1.3 trillion in an effort to help member states cope with the expense of rebuilding their economies after the coronavirus pandemic. Citing the downward pressure on inflation and the bank stated, “The PEPP expansion will further ease the general monetary policy stance, supporting funding conditions in the real economy, especially for businesses and households.” Interest rate unchanged at 0.0%, deposit at -0.5%.
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 European Central Bank kept its main interest rates unchanged -0.0% as widely expected but in a small surprise declined to increase its bond buying program, putting the decision off until at least the June 4 meeting. There had been modest market anticipation that to help eurozone governments with the skyrocketing economic cost of the Coronavirus outbreak the bank would increase the limits of its pandemic emergency purchase program (PEPP).
AUD/USD is under pressure, heading towards 0.7100 amid broad US dollar strength. Risk sentiment sours on US stimulus woes and virus contagion, lifting the safe-haven dollar. Focus remains on US stimulus news, coronavirus stats.
USD/JPY's recovery from Wednesday's 0.85% decline is picking up pace in Asia, as the US dollar gains its feet amid risk-aversion. The reports that the BOJ will likely cut its growth and price forecasts for the current fiscal year at this week's monetary policy meeting weigh on the yen.
The American dollar remained under selling pressure at the end of the week, amid political jitters in the US. Republicans and Democrats have continued to discuss a coronavirus stimulus aid package.
Gold is under pressure starting out a fresh week, battling $1900 amid resurgent haven demand for the US dollar. The greenback regains ground on Monday, as the second wave of the coronavirus accelerates at full steam in Europe.
WTI hits three-week low, extending the previous week's 3% decline. The daily chart indicators scope for further losses. The daily chart relative strength index now shows an ascending triangle breakdown, a bearish pattern.
The European Central Bank is the central bank empowered to manage monetary policy for the Eurozone. With its beginnings in Germany 1998, the ECB is empowered to maintain price stability in the euro area, so that the euro’s purchasing power is not eroded by inflation. As an entity independent of individual EU countries and EU institutions, the ECB aims to ensure that the year-on-year increase in consumer prices is less than, but close to 2% over the medium term. Another of its tasks is the one of controlling the money supply. This involves, for example, setting interest rates throughout the euro area. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Christine Lagarde is the President of this organism since November 1st 2019. Her speeches, statements and declarations are an important source of volatility, especially for the Euro and the currencies traded against the European currency.
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Christine Lagarde was born in 1956 in Paris, France. Graduated from Paris West University Nanterre La Défense and became President of the European Central Bank in November 1st 2019. Prior to that, she served as Chairman and Managing Director of the International Monetary Fund between 2011 and 2019. Lagarde previously held various senior ministerial posts in the Government of France: she was Minister of the Economy, Finance and Industry (2007–2011), Minister of Agriculture and Fishing (2007) and Minister of Commerce (2005–2007).
Prior to the Rate Decision:
After the Rate Decision:
The decision always has an effect on the Euro.
When the interest rate is increased the European Central Bank is literally selling government securities to large financial firms. In turn, the financial organizations are paying in Euros for these securities. This effectively decreases the amount of currency circulating in the economy. A decreasing supply leads to higher demand, and therefore causes the value of the Euro to appreciate.
When the interest rates are decreased, the European Central Bank floods the market with Euros. This is done by the purchasing government securities from financial organizations. In return for the securities, these banks and financial deals are paid in Euros, therefore increasing the supply of Euros in the economy. As supply increases, the value of the Euros depreciates.
The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.
In practical terms, QE means that central banks create money out of nothing to buy securities, such as government bonds. This new money swells the size of bank reserves by the quantity of assets purchased and that’s why this programme is called Quantitative Easings. The money supply is intended to flood financial institutions with capital in an effort to stimulate lending and increase liquidity.
Much of the governments’ debt is held by banks in the Eurozone and the ECB wants them to give more credits. If the European Central Bank buys government bonds, their prices rise and profitability drop even more. This is a liquidity-providing operation that weakens the value of the euro. This depreciation makes European exports cheaper and competitive, and ultimately, helps in recovering. In addition, as a result of the stimulus to internal and external consumption, the ECB combats the risk of deflation, a widespread and prolonged drop in prices, as well as the high unemployment.
The long term refinancing operation (LTRO) is a cheap loan scheme for European banks that was announced by the European Central Bank towards the end of 2011 in a bid to help ease the eurozone crisis.
Round one was carried out on 21 December, when banks took €489 billion from the European Central Bank. The loans are due to be repaid within three years at a rate of 1%, and a second round will be launched on 28 February, with the results of how much money was requested due on 29 February.
As the eurozone crisis has escalated, banks have become less stable and have less money to lend. The objective of the LTRO is to boost cash flow in the market and avoid a severe credit crunch or collapse of the banking system.
