- The European Central Bank may still further expand its quantitative easing purchases during the year.
- Analysis believes that as long as the number of new coronavirus infections continues to rise, the Euro will continue to be under pressure.
- The US dollar, meanwhile, was generally weak.
In the European market on Monday, the Euro rose about 60 points against the US dollar to a three-day high of $1.1763. Meanwhile, US President Donald Trump said that he wanted a stimulus plan larger than that of House Speaker Nancy Pelosi (D-CA). He also said that the new coronavirus vaccine will be available soon.
That boosted adventurous sentiment. However, it came before the European Central Bank President Christine Lagarde said that the European Central Bank has not exhausted all available policy tools and options, and can still take more actions if necessary in the future.
Measures, combined with the continued rebound of the European epidemic, have some people worried that there will be a second recession and limit the exchange rate. Under the implementation of new restrictions, the recovery is at risk of losing momentum, and more measures will be taken if necessary.
It should be discussed to make the recovery fund a permanent tool. The Euro is irreversible. This remark made investors continue to bet that the European Central Bank may still further expand its quantitative easing (QE) purchases during the year, which constitutes a negative for the Euro exchange rate.
Meanwhile, Italy joined the ranks of France, Spain, and other countries, and implemented restrictions to curb the spread of the new coronavirus epidemic, which undermined the economic recovery. Analysis believes that as long as the number of new coronavirus infections continues to rise, the Euro will continue to be under pressure.
Real-time statistics from Johns Hopkins University in the United States show that the cumulative number of confirmed cases of new coronavirus pneumonia worldwide exceeds 40 million, the cumulative number of deaths is 1,113,352, and the number of confirmed cases in Europe has surged.
Germany added 5,587 new coronavirus infections on Sunday, and the total number of confirmed cases has exceeded 360,000.
In response to panic buying in many places in Germany, similar to the first wave of the epidemic at the beginning of the year, German Minister of Agriculture Julia Klöckner said on the same day that everything in the German supply chain is normal, and she warned consumers that there is no need to snap up or stock up on goods.
Klöckner said that Germany has gained important experience from the “closed city” in the first half of this year to enable the economy to maintain operations during the new coronavirus pandemic.
The political and economic circles have learned how to responsibly arrange the supply of materials, she said. At the same time, Germany has also clearly realized that it will no longer close its borders without consultation. This is essential for ensuring the transportation of goods within Europe during the epidemic.
German Minister of Economy and Energy Peter Altmeier said that the increase in the number of new coronavirus infections across the country has not affected large enterprises for the time being, and there is no need to implement overall quarantine.
The Bank of Tokyo-Mitsubishi UFJ said the second quarter the Euro foreign exchange reserves, shares has gone up, and the valuation of the new purchases play a big role.
The International Monetary Fund provided an analysis of the changes in foreign exchange reserves held in the second quarter. The US dollar reversed its downward trend in the first quarter throughout the second quarter, and showed substantial growth.
The US Dollar was Generally Weak
The bank pointed out that the holders of foreign exchange reserves purchased about €47 billion in the second quarter, indicating that after the sharp sell-off in the first quarter, the market’s confidence in the euro has risen cautiously. The European Central Bank’s policy measures and the European Union Recovery Fund plan may boost the market.
The results of the study indicate that holders of foreign exchange reserves may continue to introduce more interventions to allow their currencies to depreciate and slow down the crisis of the new coronavirus epidemic. It is gratifying that although the Euro may once again face challenges due to the resurgence of the new coronavirus epidemic in Europe, the market has recovered confidence in the Euro.
A stronger euro will increase the risk of the European Central Bank’s implementation of negative interest rates, directly or indirectly suppressing the Euro.