Market News & Analysis

Top Story

ECB Fires its Coronavirus Bullet, Market Unimpressed

After a series of mostly ineffectual interventions from policymakers in the US, UK, Australia, and elsewhere, the European Central Bank stepped into the batter’s box this morning. Just yesterday, newly-anointed ECB President Christine Lagarde announced that without coordinated action, Europe “will see a scenario that will remind many of us of the 2008 Great Financial Crisis,” so market participants were on the edge of their seats to see what she would announce.

Bucking market expectations, Lagarde and company left the ECB’s primary interest rates unchanged, though they did announce a new Long-Term Refinancing Operation (LTRO) to provide immediate liquidity and an increase to monthly bond purchases by 120B. In more technical details, the rate on the new LTROs will be 0.25% below the average of main refinancing operations and the amount that counterparties can borrow was increased to 50% of eligible loans.

Put simply, it appears that the ECB believes negative interest rates will not have a meaningful impact in combatting coronavirus, and while some of its unconventional policies may have a role to play, fiscal policy is the best tool to address the crisis. European stock markets, disappointed by the lack of an interest rate cut, quickly dumped lower with Germany’s DAX bourse shedding more than 2% in 10 minutes following the release. In the FX market, EUR/USD saw a quick 100-pip spike to trade briefly above 1.1300, though that move quickly faded and the pair is now trading little changed.

Source: TradingView, GAIN Capital

With traders clearly unimpressed in the initial market reaction, President Lagarde will take the stage for her ECB press conference at 13:30 GMT, shortly after we go to press. Traders will be looking for clarity on what the central bank expects the new measures to accomplish and whether the ECB has any more strategies left in its toolbox. Any hints of coordination with fiscal policymakers, especially in Germany, could help stabilize the selloff in European stocks and boost the euro, while a lack of clarity and confidence could take EUR/USD below today’s low at 1.1200 and lead to another round of selling in the single currency.


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.