Even with the huge stimulus package announced, euro’s move was limited as the market felt that both the ECB and the individual countries should have taken more measures. Any rally in EUR/USD is an opportunity for a short.

  • ECB launched the long-awaited stimulus package in a bid to calm the market as a result of the COVID-19 pandemic on the global market.
  • The COVID-19 situation has gone pretty much out of hand given that ECB has just announced a new stimulus effort last week and had to expand the programme even further.
  • The new temporary asset purchase programme of the private and public sector securities aims to counter the serious risks to the monetary policy transmission mechanism which will last until the end of 2020.
  • Christine Lagarde also said that the ECB is fully prepared to increase the size of its asset purchase programmes and adjust their composition, by as much as necessary and for as long as needed.
  • However, optimism on euro will be short-lived (if there’s any) because investors are selling what they can to keep their money in dollars due to the unprecedented amount of uncertainties caused by the virus pandemic.
  • Furthermore, the situation in some European countries are worsening, with Italy reporting its deadliest day with 475 deaths, taking the overall death toll to 2,978, with almost 36,000 total cases reported as of Wednesday evening.
  • Unless the number of COVID-19 cases starts to fall, we believe that no amount of stimulus will be sufficient.
  • The extreme risk aversion is causing money to flow into dollar which will continue to pressure EUR/USD lower. EUR/USD can head lower towards 1.0500 in the weeks to come.

    EUR / USD

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Fullerton Markets Research Team

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