.com – The european markets fell on Thursday, while the attempts of the european central Bank to revive the mediocre growth in the region were to draw attention to a sharp slowdown in growth.
The euro fell to its lowest level of the year against the dollar, the bond yield German 10-years fell to its lowest level since 2016, while the STOXX 600 was on track to record its worst day of the month. Yields on Italian 10-year reached their lowest level since may, when the populist government of the country prepared to take power.
The EUR / USD reached a low of the session to 1,1222, the lowest since the 13 November and is trading at 1,126 at 10h36 ET (15h36 GMT).
The ECB has not only reduced its growth forecasts to 2019 for the euro area from 1.7% to 1.1%, but it has also unveiled a new series in low-cost loans to banks and pushed back the timing of its first interest rate hike in nearly a decade.
“The weakening economic data suggesting a moderation noticeable in the pace of economic expansion is expected to continue during the current year,” said Mr Draghi at a press conference. “The persistence of uncertainties related to geopolitical factors, the threat of protectionism and the vulnerability of emerging markets seem to leave traces on the economic climate”.
In a regular update, the ECB has also stated that they had to wait until now to a growth of 1.6% in 2020, down from 1.7%. The forecast for 2021 remains unchanged at 1.5%.
The ECB will begin a new series of refinancing operations to long-term target, say TLTRO in September 2019. They will continue until march 2021, each with a maturity of two years, and be related to the rate of refinancing. This means that their cost will increase if the ECB raises rates next year.
“A closer inspection reveals that this change is less ambitious than suggested by Draghi, and that it does not substantially alter the prospects of the market”, said Jan van Gerich, an analyst at Nordea Markets, which now expects a first rate increase from the ECB in June 2020.
The ECB has also reduced its inflation forecast to 1.2% this year, against 1.8% in December and to 1.5% in 2020, from 1.6%. For 2021, the rate of inflation is 1.6%. If this proves to be a good idea, this would mean that the ECB has exceeded its inflation target for nine consecutive years, said Nick Kounis, head of financial market research at ABN Amro, via
According to the analysts of ABN Amro, the euro could drop to 1.10 by the end of the month.
The bank said that “most of the negative news are expressed in euro” and it is expected that the finals of the T1 and T2 end at $ 1.10, which should “reach the floor”.
The ECB has left its refinancing rate principal, who determines the cost of credit in the economy, unchanged, as expected.