The ECB will increase the purchase of bonds

After Thursday, the European Central Bank raised hopes for a relatively rapid recovery thanks to another large number of incentives, virtually doubling its planned bond purchases to 1.35 trillion euros. The increase in purchases by 600 billion euros was significantly above the consensus of analysts, who expected growth in purchases by 500 billion euros. For many economists, however, the reason for the ECB’s immediate stimulus is compelling, as the euro area economy contracted at a record pace in the first quarter and is expected to decline by as much as 14.7% in the second.

The central bank also added that purchases would take place by the end of June 2021, which is six months longer than originally planned, and that it would buy bonds under a pandemic emergency purchase program at least until the end of 2022.

By approving the program, the affected countries have benefited the most, as we can see by the decline in the yields of Italian, Greek and Spanish bonds to the levels from the beginning of March. The stock market was dominated by airlines and the banking sector on the southern edge of the euro area, as the ECB’s activity was associated with increased optimism about the summer influx of tourists. Interesting and, for the most part, incomprehensible was the strengthening of the euro on a pair with all currencies. The reason was probably the stimulus that should revive the ravaged economy by the coronavirus pandemic.