Christine Lagarde takes another step in her "Whatever it takes" approach

December 11, 2020 13:30

Christine Lagarde takes another step in her "Whatever it takes" approach

Since yesterday's session, Christine Lagarde has not only endorsed the famous phrase of her predecessor, Mario Draghi, from July 2012, but also taken "Whatever it takes" to another level, after announcing an expansion of the current stimulus program in the last meeting of the year.

During her press conference, she announced:

  • The current program to fight the pandemic (PEPP) will increase by half a billion euros, expanding this program to 1.85 billion euros, just 6 months after its last expansion in the month of June
  • This guarantees the validity of this program up until March 2022.

This movement has caused the 10-year bonds of various countries like Spain to trade negative for the first time, thus joining countries such as Portugal or France, while Italy continues to pay 0.566% for its 10-year bonds.

In addition to this measure, the European Central Bank also announced:

  • An increase in its liquidity auction injection program known as TLTRO III until June

They are considering maintaining its veto on the distribution of dividends from banks, although there will be some exceptions, thus affecting the banking sector, once again keeping interest rates at 0%.

On the other hand, it seems that the European Union is finally unlocking its aid program for post-covid recovery, although these will probably not arrive until summer after both Hungary and Poland withdraw their veto.

Waiting for America

After last Friday, we learned of bad employment data in the United States. A new stimulus package of 908 billion dollars seemed closer, but it appears that we will have to wait a few more days since uncertainty is growing.

While we wait for the United States to definitively approve a new stimulus plan before the end of this year 2020, the Japanese government has announced an extraordinary stimulus plan of 3 billion euros in which 80% will go to a plan to subsidize travel within the country to reactivate internal tourism and, thus, reactivate this sector so badly affected by the pandemic.

The dollar continues to weaken

While we wait for the United States to announce its new stimulus program, the US dollar continues in its process of weakening against the rest of the main currencies. So far this month, the dollar index has lost around 1.23% trading at a minimum of 90.49 points after losing its previous support level at 92.13 points. As such, there has been an increase in the downward trend that began at the end of last March after reaching the level of 103.00 points.

With its three moving averages sloping downward and its MACD in negative territory, the mood in the medium term remains bearish, although in the short term, we may find a recovery due to the overbought signs that we observe in the stochastic indicator.

Dollar index daily chart

Source: Admiral Markets MetaTrader 5 Supreme Edition, Dollar index daily chart (from August 23, 2019, to December 11, 2020). Completed: December 11, 2020. Note: Past performance is not a reliable indicator of future results or future performance.


Did you know that you can open a free demo trading account to test your trading ideas and theories regarding the price direction of thousands of markets in a virtual trading environment? Open your free account today by clicking on the banner below and receive free access to Premium Analytic tools and more!

Trade With A FREE Demo Trading Account


INFORMATION ABOUT ANALYTICAL MATERIALS:

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

1.This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.

2.Any investment decision is made by each client alone whereas Admiral Markets UK Ltd (Admiral Markets) shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.

3.With a view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.

4.The Analysis is prepared by an independent analyst Roberto Rojas, Freelance Contributor (hereinafter "Author") based on personal estimations.

5.Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.

6.Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.

7.Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.

Avatar-Admirals
Admirals
An all-in-one solution for spending, investing, and managing your money

More than a broker, Admirals is a financial hub, offering a wide range of financial products and services. We make it possible to approach personal finance through an all-in-one solution for investing, spending, and managing money.