Euro Rises to One-Week High Despite ECB Stoking Double-Dip Recession Fears

Euro Rises to One-Week High Despite ECB Stoking Double-Dip Recession Fears

The euro rose to a one-week high against the greenback even as European Central Bank President Christine Lagarde stoked fears the eurozone is set for a double-dip recession as the pandemic ravages economies across the bloc.

EUR/ USDrose 0.47% to $1.2161.

The ECB left its rates unchanged and maintained its current pace of bond buying on Thursday. But Lagarde suggested that the prolonged coronavirus restrictions across the bloc had likely caused eurozone growth to fall again in the final quarter of 2020.

“Risks surrounding the euro-area growth outlook remain tilted to the downside, but less pronounced,” Lagarde said. Still, there was reason for optimism as the roll out of vaccines, which started in late December, “allows for greater confidence in the resolution of the health crisis,” she added.

The European Central Bank also signaled it may not need the full extent of its emergency purchase program to support the recovery. Though added that the program could be increased to ensure the euro area economy remains well financed. “If favourable financing conditions can be maintained with purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full,”  according to the monetary policy statement.

Lagarde, however, did not elaborate on how it would assess whether financing conditions were favorable, saying that the central bank would adopt a “holistic approach.”

Some analysts, however, believe the central bank will primarily focus on curbing rising sovereign bond yield in countries across the bloc with high levels of debt like Italy.

The pan-European Stoxx 50 climbed down by 0.16%  to 3,618.04 . In the cash markets, the DAX futures Germany was trading 0.11% down at 13,906.67. CAC 40 futures in France climbed down by 0.67% to 5590.79, while the FTSE 100 futures in the U.K. fell by 0.37% to 6,715.42 ,at the time of writing.

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