Euro trades near $1.20 after ECB pledges to step up bond purchases in Q2

Avatar photo

Vrasidas Neofytou
Head of Investment Research

See all articles
Euro trades near $1.20 after ECB pledges to step up bond purchases in Q2

Euro trades near the $1.20 mark after the European Central Bank promised to step up its pace of bond purchases over the next quarter, easing the concerns for the elevating bond yields in the Eurozone.

EUR/USD pair, Daily chart


European Central Bank’s decisions:

The Frankfurt-based European Central Bank decided yesterday to maintain its interest rates at 0.00% and leave its 1.85 trillion euros ($2.21 trillion) PEPP-Pandemic Emergency Purchase Program unchanged until March 2022, without discussing the further increase of the amount.

Hence, it pledged to ramp up its bond purchases in the second quarter of 2021 at a higher pace than during the first quarter, based on the EU inflation outlook and current market dynamics. By increasing its bond purchases, ECB could tap the recent bullish momentum in yields, keeping the borrowing costs lower.

ECB’s president Christine Lagarde’s targets were to calm down the bond markets and ease the inflation concerns among investors as the Eurozone’s bond yields have been rising in tandem with the US bond yields since mid-February amid the massive fiscal and monetary policies.

Market participants afraid that the faster-than-expected rally in the bond yields around the world could harm the global economic recovery, by increasing the lending costs of the companies and countries that already struggling with the pandemic.


Eurozone’s Economic Outlook 2021-2022:

According to the latest ECB’s forecasts, the 19-Eurozone’s economies GDP-Gross Domestic Product could grow by 4.0% in 2021 and 4.1% in 2022, getting support from the massive fiscal stimulus, low interest rates, successful vaccine rollout, and the reopening of the local economies.

However, the ECB’s projections for faster economic recovery could be at risk as many countries remain under strict social restrictions to limit the spread of the Covid-19, while the EU’s vaccine rollout program is far behind the schedule, compared to the UK.

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Exclusive Capital communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument.

Read our detailed Marketing Communication Disclaimer

SHARE

CONNECT WITH OUR TEAM

Explore the ways in which we can help you achieve your investment goals.

OUR PARTNERS
bdo

EXTERNAL AUDITOR

ey

LEGAL ADVISOR

lgt

CUSTODIAN BANK

efg

APPROVED PARTNER

Raiffeisen

DEPOSITORY BANK

Prime Fund

GROUP MEMBER