The euro depreciated against its major trading partners in the European session on Thursday, after European Central Bank President Christine Lagarde warned of an “unprecedented” downturn in the euro area that is likely to steepen further during this year, and urged coordinated policy action to protect against downside risks and support the recovery.
In her customary press conference, Lagarde said that euro area GDP could fall by between 5 percent and 12 percent this year, depending on the duration of the containment measures and the success of policies to mitigate the economic consequences for businesses and workers.
Measures to contain the spread of the COVID-19 had largely halted economic activity in all the countries of the euro area and across the globe, the ECB chief said.
“Survey indicators for consumer and business sentiment have plunged, suggesting a sharp contraction in economic growth and a profound deterioration in labour market conditions.”
Lagarde said that the Governing Council is determined to continue to support households and firms in the wake of the current economic disruption and heightened uncertainty to safeguard price stability target.
Following its scheduled meeting, the Governing Council eased the conditions on the targeted longer-term refinancing operations, or TLTRO. The bank lowered the interest rate on TLTRO operations to 50 basis points below the average interest rate.
In order to support liquidity conditions, a new series of non-targeted pandemic emergency longer-term refinancing operations, or PELTRO, will be conducted from May 2020.
Further, the ECB will continue its EUR 750 billion new pandemic emergency purchase programme in a flexible manner over time, across asset classes and among jurisdictions.
Moreover, net purchases under the asset purchase programme will continue at a monthly pace of EUR 20 billion, together with the purchases under the additional EUR 120 billion temporary envelope until the end of the year.
The ECB left the key interest rate, which is the rate on the main refinancing operations, at record low zero, as expected.
The deposit facility rate was kept at -0.50 percent. The marginal lending facility rate was maintained at 0.25 percent.
Flash estimate from Eurostat showed that inflation slowed in April due to a sharp decline in energy prices.
Inflation slowed to 0.4 percent in April from 0.7 percent in March. Nonetheless, this was above forecast of 0.1 percent. The fall in inflation was largely driven by a 9.6 percent decrease in energy prices.
Data from the Federal Employment Agency showed that German unemployment increased sharply in April as coronavirus pandemic weighed on job creation and economic activity.
The jobless rate rose to 5.8 percent in April from a near-record low of 5.0 percent in March. The rate was forecast to rise moderately to 5.2 percent.
The currency declined against its most major counterparts in the Asian session, as investors await a policy decision from the European Central Bank amid worsening economic situation in the currency bloc.
The euro shed 0.5 percent to 1.0833 against the greenback, after climbing to a 10-day high of 1.0891 at 3:00 am ET. The pair had closed Wednesday’s deals at 1.0871. Further drop in the euro may locate support around the 1.06 area.
Having advanced to a 2-day high of 116.14 at 3:00 am ET, the euro turned lower against the yen, falling 0.5 percent to 115.58. The pair was worth 115.92 when it ended deals on Wednesday. Should the euro falls further, it is likely to test support around the 111.00 region.
Data from the Cabinet Office showed that Japan’s consumer confidence weakened at a record pace in April.
On a seasonally adjusted basis, the consumer confidence index decreased to 21.6 in April from 30.9 in March.
The euro was down 0.4 percent against the franc, at 1.0548. At Wednesday’s close, the pair was valued at 1.0588. The euro is seen facing support around the 1.04 mark.
Data from the Federal Statistical Office showed that Switzerland’s retail sales decreased sharply in March amid the coronavirus, or Covid-19 outbreak.
Retail sales fell a working-day and holiday adjusted 5.6 percent year-on-year and 6.2 percent from the previous month in March.
The euro weakened to the lowest level since March 9 against the pound, at 0.8675. The euro-pound pair had finished yesterday’s trading session at 0.8722. Immediate support for the euro is likely seen around the 0.84 level.
Data from the Society of Motor Manufacturers and Traders showed that British car production declined in March as coronavirus pandemic forced factories to close.
Car production declined 37.6 percent on a yearly basis in March. Only 78,767 vehicles left factory gates in March.
The single currency remained lower against the loonie with the pair trading at 1.5054. This was a pip short of near a 2-month low set in the Asian session. The euro was trading at 1.5086 per loonie at yesterday’s close. The euro is likely to find support around the 1.47 mark.
The 19-nation currency was trading at 1.7683 against the kiwi, not far from near a 2-month low of 1.7661 it recorded in the Asian session. At yesterday’s trading close, the pair was quoted at 1.7721. Extension of the euro’s downtrend may take it to a support around the 1.72 region.
In contrast, the euro spiked up to a 2-day high of 1.6728 against the aussie, after falling to 1.6539 at 1:00 am ET, which was its weakest level since February 27. The euro-aussie pair was worth 1.6579 at Wednesday’s close. Next key resistance for the euro is possibly seen around the 1.80 level.
Data from the Australian Bureau of Statistics showed that Australia export prices rose 2.7 percent on quarter and 2.3 percent on year.
Main contributors to the rise were: Gold, non-monetary (excluding gold ores and concentrates) (+11.4 percent); Metalliferous ores and metal scrap (+2.3 percent); Gas, natural and manufactured (+4.3 percent); and Meat and meat preparations (+4.0 percent).