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Investors brace for contraction as ECB prepares to announce Q1 economic data


Investors brace for contraction as ECB prepares to announce Q1 economic data

europe economic q1
Photo: Reuters

The European Central Bank (ECB) will today release the Eurozone’s GDP figures for the first quarter of 2020 along with official details on inflation and lending rates.

The market moving report is projected to reveal dismal economic data for March and strongly influence upcoming currency movements.

ECB President Christine Lagarde recently raised the possibility of a 15% contraction across the bloc. All major central banks—including the ECB, Bank of Japan and Federal Reserve—have slashed rates to combat the COVID-19 pandemic’s economic fallout. Rates hover near zero. Negative rates, a controversial method of boosting investment during financial crises, could become an increasingly common last resort against surging unemployment and rapid deflation.

Increasing bond purchases remains another option, although recent aggressive easing suggests that the ECB is unlikely to commit to further policy moves before June. Efforts will likely focus on a European Council bailout package and an expansion of the Pandemic Emergency Purchase Programme (PEPP) by $540 billion in the coming months. While recent data shows increased Euro speculation, currency fluctuations will be determined by the depth of damage described by the Q1 figures. New Euro and US dollar trades before Thursday will carry significant event risk associated with the upcoming GDP reports and central bank meetings.

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