MarketDeal24.Com – The European Central Bank left its monetary policy unchanged yesterday but President Lagarde confirmed that change is coming soon. The euro has depreciated sharply in the wake of the news. According to the ECB president, they want to revise all strategies in their next policy.
We thought there was little chance of taking action at today’s meeting, but the central bank would use the next six weeks to review how much stimulus is needed, the effectiveness of nationwide lockdowns in Europe, and the outcome of the US election. If they had decided to change today, European markets would have risen further, but any positive market conditions could change in a moment on the day of the US election.
ECB President Lagarde said the third quarter GDP, which is set to be released today, could be better. However, coronavirus infections are on the rise and the imposition of lockdowns in various countries could cause massive damage to the economy, leading to a decline in GDP in the fourth quarter.
La Maire, head of France’s finance ministry, said the recent lockdown could cause their economy to shrink by 15%. There is still some doubt as to whether more incentives will be needed and they will have all kinds of reports on hand before the policy changes in December, so it will be easier for the central bank to decide on incentives.
At the very least they need to increase resource purchasing and epidemic emergency purchase programs. The market will want them to cut interest rates, but interest rates are already at record lows, so further cuts will not have much of an impact on the economy.
The biggest question for forex traders is how much the euro could fall. The value of the EUR/USD may rise slightly today in the wake of the US election next week and the release of the third quarter GDP today. The depreciation closed at the 100-day SMA yesterday, which remains a strong support.
Market risk may increase on Monday and Tuesday early next week, but how it reacts after the election results are announced is now a major issue. If there is a fierce battle in the election, then a big change can be noticed in the forex market, but if someone wins by large number, then the currency market will remain normal.
The release of better-than-expected third-quarter GDP has pushed the U.S. dollar and U.S. stock markets higher. President Trump has promised big incentives after the election. But whoever wins the election, the Americans will be motivated. While European countries are taking various steps to control the virus, the United States has recorded the third highest number of infections per day.
The current government is hoping for a vaccine but by then their health sector is suffering huge losses. The hospitals are full of corona patients. But the American government is not paying any attention to that. Lockdown has been given in various states on behalf of the local government though.