The European Central Bank says it is ready for a crisis

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According to Christine Lagarde, the Head of the European Central Bank (ECB), the arsenal of economic stimulus in the wake of the rise in Covid-19 and the associated economic downturn in both the Euro area and the European Union as a whole is standing by. “The many weapons that we have available, ranging from interest rates to forward guidance and asset purchase programs, we stand ready,” said Lagarde. According to the World Health Organization (WHO), Europe has recorded more than 7.4 million cases of coronavirus with 251,478 deaths, and the number of related hospitalizations has increased at an alarming rate.

In this situation, the exchange rate of the single European currency, the Euro (EUR), fell slightly against other world currencies. On Friday 8 October 2020 at 7:35 am CET it weakened slightly against the US dollar (USD) and the Japanese yen (JPY) but at the same time, it strengthened slightly against the British pound (GBP). At this time, the EUR/USD currency pair was trading at a mutual exchange rate of US$1.171 per EUR, with the daily weakening of the EUR by -0.1% of the exchange rate against the USD. The position of the exchange rate of the EUR against the GBP was in the trading trend of the bull market for the EUR. On the morning of 16 October at 8:51 am CET it traded at a mutual exchange rate of GBP 0.907 per EUR with the current daily strengthening of the EUR by +0.12% against the GBP. According to analysts, what has an effect on the exchange rate of this EUR/GBP currency pair is the fact that there is still no agreement between the EU and the UK on Brexit, and the current outlook does not provide a strong prediction that the agreement will take place. It is quite possible that a so-called “hard Brexit” will take place.

However, the Japanese yen (JPY) still maintains a relatively stronger position against the EUR, than against the USD. On 16 October at 8:54 am CET the EUR/JPY currency pair traded at JPY 123.15 per EUR with the current daily weakening of the EUR by -0.227% against the JPY. The mutual exchange rate of the USD/JPY currency pair was 105.31 JPY per USD, with the daily decline of the USD by -0.123% against the JPY.

Christine Lagarde, said on the 15 October that her organization would be ready to take further emergency measures to address the economic impact of the coronavirus crisis, with the EU region still facing a rapid rise in Covid-19 infections. “We are still in the long grass for the moment and there is still a lot of work to be done, especially as from this corner of the world in Europe, we are seeing recurrences of contagion,” Ms. Lagarde said during an IMF World Bank panel on Thursday. “We are seeing maybe a second wave on the horizon or hitting the coastline of Europe and we better make sure that all the arsenal that we have available is actually dealing with the situation by adopting the right policies,” Ms. Lagarde said, adding that an increase in fiscal spending was “being considered” by many member states as they present their budgets. According to analysts, the final shape of the fiscal state budgets of the Euro area and the EU will affect the exchange rate of the Euro in 2021.

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