The market mood is a little more tepid, as some investors are hoping for something from the ECB later in the day
We are finally starting to get a sense of how bad the economic fallout is from the virus outbreak, as we see Q1 GDP figures from Europe being reported today.
For some of the countries, these reflect less than a month's worth of lockdown measures and yet we are seeing record economic contractions already in the first quarter.
April and Q2 is going to be much, much worse if this is anything to go by and the worrying thought is that we may not even see any real return to "normal" conditions as we look towards Q3 - let alone if there is a secondary outbreak to follow.
Investors are largely brushing aside the pessimistic picture that is painted by the economic data releases today, but it is still keeping a lid on optimism as we see stocks pull back in European morning trade to be more mixed currently.
The burden of any further risk rally ahead of the weekend - for some parts of Europe, the weekend begins tomorrow - now falls upon the ECB.
I'll provide a more comprehensive preview later in the session but this is just to try and understand sentiment ahead of the policy decision and Lagarde's press conference.
The market is keeping more tepid on hopes that the ECB may deliver something or at least some message on added stimulus measures.
And that is going to be a tall order given that they would much prefer to sit back for now after the host of policy measures that they have announced over the past month or so:
- Expands QE by €120 billion
- Announces additional TLTROs
- Announces looser TLTRO terms
- Announces weekly USD swap lines
- Launches pandemic emergency purchase programme (PEPP)
- Provides added flexibility on prudential treatment of loans
- Enhancement of USD swap lines
- Confirms purchase limits not to apply to PEPP holdings
- Announces collateral easing measures
- Announces change to provisions on collateral eligibility
Language is going to be key for the ECB if they are not going to take action today. And they must avoid disappointing the market if investors are depending on them to deliver in order to chase the risk rally this week any further.
