By Yasin Ebrahim
Investing.com – The euro slipped against the dollar on Wednesday as European Central Bank policymakers continued to tout further easing on the horizon, though downplayed the prospect of further interest rate cuts.
EUR/USD fell 0.35% to $1.1772.
“While all options are on the table, the pandemic emergency purchase program and targeted longer-term refinancing operations have proven their effectiveness,” ECB governor Christine Lagarde said at the ECB forum on central banking in Frankfurt. “They are therefore likely to remain the main tools for adjusting our monetary policy.”
Further insight into the central bank’s thinking on monetary policy comes just weeks after the Lagarde said all members agreed that it “was necessary to take action and recalibrate our instruments at our next Governing Council meeting.”
Lagarde, however, downplayed the optimism on a recovery in the wake of recent positive vaccine news, cautioning that it is unlikely to be linear across the European Union.
“While the latest news on a vaccine looks encouraging, we could still face recurring cycles of accelerating viral spread and tightening restrictions until widespread immunity is achieved,” she added. “The recovery may not be linear, but rather unsteady, stop-start and contingent on the pace of vaccine roll-out.”
Some analysts agree, citing the continued surge in Covid-19 cases, which has prompted France and Germany, two of Europe’s largest economies, into further lockdowns.
“None of this [positive vaccine news] unfortunately changes the near-term fact that the global economy faces a challenging winter. Renewed lockdowns across the eurozone are likely to shave roughly 2% off GDP in the fourth quarter, according to our latest forecasts, while the risk of further restrictions in the US will put a considerable brake on activity,” ING said in a note.”With covid numbers still rising and containment measures taking their toll, the near term downside risks are still dominating and elicit still cautious messaging.”