30th April 2019 - The single currency is still waiting for an impressing ECB's action

Walid Salah Eldin

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After continued EU failure to reach even a conviction among its members to support the EU economy as one, the turn is now on the ECB to take further stimulus actions to support the EU stagnant economy.

Following Mar. 12 ECB governing council members meeting, ECB president Christine Lagarde assured on that the bank is ready to take more steps to support the economy in the same time she stressed on the financial role as she used to.

The markets are still in the sake of EU co-ordination to stave off the economic slide to lower points before rising.

This required cushion is still far from reaching, despite the crisis which actually show many deficits in the union which could not face the crisis as one nation or even well structured to do as commitment.

This crisis and also previously the credit crisis in 2008 have highlighted the big difference between the US ability to response and the EU ability which very lagged behind US which could enter tightening cycle in 2017 and 2018 before starting easing back, while the ECB is still tied standing still unable to even follow the FED which is really working along with the government to give the needed support to the economy.

Even before this current sparked crisis by Covid-19, the US economy could got boosts by several reflation plans worth more than USD1.5tr and has been actually waiting for more financial stimulus plan to come following the US presidential elections.

In response to the crisis, the Fed's balance sheet expanded by about USD2.3tr until now reaching USD6.6tr, while the US government could initially mull a stimulus plan worth some $1.2tr including $1k to every American.

While the Economic situation in EU is still struggling to implement the hardly reached agreement by the EU finance ministers on a €540b package to prop up the economy which locked down because of the pandemic,

While it is forbidden in EU to watch direct funding to the EU governments deficit by the ECB which can only intervene in the secondary money markets to lower the debt yield, The FOMC members as expected ended their meeting yesterday on keeping its unlimited QE program on for buying Treasuries.

The committee kept also its indoors funding windows opened for households and small business and also outdoors swap lines to supply USD to other central banks on the lowest possible costs to restore confidence in the banking sectors across the globe in the face of the current disruptions.



The shared currency is still depressed on this current economic stance in EU and the inconvenient political situation in EU on funding the EZ countries debts which can keep the door opened to the ECB to do whatever it can to revive the economy even if it is to be on the account of the common currency value which reflects all of these current facts which made it vulnerable to the downside recently.


Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
 
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