After EU Leaders' Failure ECB Expected To Act
Fiona Cincotta April 29, 2020 2:48 PM
ECB to target "fallen angels"?
Central Bank action has been much more spontaneous is recent weeks, but that doesn’t mean that we won’t be watching the ECB’s monthly meeting closely. However, with lockdown starting to ease across the bloc will wee see further action from the ECB?
So far the ECB’s virus response has been modest, particularly when compared to the Fed. We don’t expect Christine Lagarde to follow the Fed’s lead and throw everything including the kitchen sink at the coronvirus crisis, although we do expect some action for the ECB, now seen as the “only game in town”.
An additional €500 billion in asset purchases or even a doubling of the current programme are very real possibilities. The central bank could also look to buy up junk bonds or opt for cheaper bank loans. Most likely will be an expansion of the PEPP to include fallen angel bonds, bonds which have recently lost their investment grade.
Expectations for action are riding high. Failure by the ECB to act could hit the Euro hard.
EUR/GBP levels to watch:
After dropping sharply from March highs EUR/GBP traded with a mild negative bias across April. The pair has just slipped through its 50 sma on 4 hr chart at 0.8741.
Immediate support can be seen at 0.8680 (support since mid April) and breakthrough here could open the door to 0.8620 (low March 5th)
Resistance can be seen at 0.8863 (high 21st April) prior to 0.8915 (high 5th April)
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.