Lagarde highlights from ECB press conference

  • recovery speed and scale remain highly uncertain
  • policy helps support flow of credit to companies
  • welcomes government measures
  • continued ambitious efforts needed
  • Euro area economy could shrink by as much as a 12% in 2020
  • Announces new PELTROs or non-targeted pandemic emergency longer-term refinancing operations in an effort to support liquidity conditions in the euro area financial system and contribute to preserving the smooth functioning of money markets by providing and if effective liquidity backstop
  • ECB expects to keep the main refinancing operation and the interest rates on marginal lending rate facility and the deposit facility at present levels or lower levels until it has seen the inflation outlook robustly converts to a level of sufficiently close to but below 2%
  • ensuring monetary policy transmitted to all countries
  • ECB is ready to adjust all instruments by as much as necessary and as long as necessary
  • pandemic severely affected manufacturing, services
  • economic impact likely to even be more severe in 2nd quarter
  • growth expected to resume as containment is lifted
  • duration epidemic highly uncertain
  • ECB prepared to extend PEPP for as long as needed
  • Euro area GDP can fall by -5% to as low as -12%
  • expects headline inflation to drop considerably in coming months
  • virus implications for longer-term inflation highly uncertain
  • him coordinate fiscal stance is critical
  • longer-term inflation expectations less affected
  • more favorable TLTRO3 terms should encourage lending
  • the highest priority has to go toward saving lives

In the debt market , the Italian and Spanish bond yields have moved lower,with 2 year yields down by 15 basis points to 0.47% in Italy. That is the lowest in over 3 weeks. In Spain, the 10 year yield touches 0.74%. Which is the lowest rate since April 7.

For the EURUSD, the pair remains confined and near unchanged levels at 1.0873. The pair remains between 1.0860 and 1.0885 over the last few hours.