Euro Falls Sharply After German Court Rules Against ECB's QE Program
May 05 2020 - 03:32AM
RTTF2
The euro fell against its major counterparts in the European
session on Tuesday, as Germany's top court ruled that the European
Central Bank's mass bond-buying to support the euro area partly
violates the German constitution.
The court said that the Bundesbank must stop buying government
bonds within three months unless the ECB proves that those
purchases are needed.
The court observed that the decision exceeded "the monetary
policy mandate of the ECB" and gave the central bank three months
to take steps to amend the scheme.
"The Bundesbank may thus no longer participate in the
implementation and execution of the ECB decisions at issue, unless
the ECB Governing Council adopts a new decision that
demonstrates...the PSPP are not disproportionate to the economic
and fiscal policy effects," the court said.
Data from Eurostat showed that Eurozone producer prices declined
at a faster pace in March due to a sharp fall in energy prices.
Producer prices decreased 2.8 percent year-on-year in March,
faster than the 1.4 percent decrease in February.
The euro depreciated to a 6-day low of 1.0826 against the
greenback, 5-day low of 115.61 against the yen and a 4-day low of
0.8701 against the pound, from its early highs of 1.0926, 116.57
and 0.8764, respectively. The next possible support for the euro is
seen around 1.06 against the greenback, 112.00 against the yen and
0.84 against the pound.
The single currency hit 1.0518 against the franc, its lowest
level since April 24. On the downside, 1.02 is possibly seen as the
next support level for the euro.
Reversing from its early highs of 1.5366 against the loonie,
1.8038 against the kiwi and 1.6985 against the aussie , the euro
dropped to a 5-day low of 1.5231, 4-day lows of 1.7907 and 1.6815,
respectively. The euro is seen finding support around 1.51 against
the loonie, 1.67 against the kiwi and 1.61 against the aussie.
Looking ahead, U.S and Canadian trade data for March and U.S. ISM
non-manufacturing composite index for April will be out in the New
York session.
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