Lagarde reiterates ECB to monitor exchange rate closely

President of the ECB Christine Lagarde failed to add much new information on monetary policy during her speech yesterday, although she did again reiterate that the bank was monitoring exchange rate movements very closely. This afternoon’s ECB meeting accounts will be eagerly awaited by the market, although we don’t envisage anything particularly newsworthy to come out of them. The euro has just begun to lose a bit of steam in the last week or so, we think partly a result of the contrasting approaches to handling the pandemic between the US and Euro Area, with the latter enforcing much stricter containment measures that look likely to remain in place for a little while yet.

Meanwhile, sterling continues to largely hold its own, despite the doom and gloom headlines surrounding the pandemic. A record of more than 1,500 COVID-related deaths were recorded yesterday, albeit much of these run on a delay with the actual fatality numbers based on the date that they occur still much lower than the peak in April, despite considerably higher testing. There have also been signs of a plateauing in both cases and hospital admissions in some areas, although it is still too early to begin drawing any conclusions from this.