At its meeting on Thursday 30 April, the European Central Bank left its key interest rates unchanged, with the deposit rate remaining at -0.5% and the reference rate at 0.00%.
The bank reduced the interest rate under the emergency bank lending programme (TLTRO III) and offered a new series of long-term pandemic refinancing operations (PELTROs) to provide additional liquidity to banks.
However, investors hoped that the ECB would announce the extension of its bond purchase programme to junk bonds, as countries across the region would likely face downgrading by credit rating agencies, as is the case in southern Europe.
As we mentioned in our comment this morning, the European Central Bank may have waited until the new macroeconomic projections are announced. These, in turn, will not appear until the June meeting. Further steps and actions are then likely to be taken to accelerate growth and inflation in Europe in the second half of 2020, after a likely fatal first half.
The latest data showed that the euro area economy contracted by 3.8% in the first quarter compared to market expectations of 3.5%. This was the biggest drop in GDP since the data began to be published. Most countries closed their economies in the second half of March, but this was enough for such a huge drop in GDP. The second quarter may be even worse, as the economies were closed throughout April. The economies of France, Spain, and Italy shrank the most.
It seems that as a consequence of weak data, together with the lack of ECB action on a larger scale, stock exchange indices in Europe began to fall. In addition, the weaker-than-expected GDP data of the largest euro-area economies, as well as the sharp rise in unemployment in Germany, seem now affecting investor sentiment.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
