US Open – ECB delivers, Lagarde presser sinks rally, US eyes China Media, Continuing Claims rise, Oil off lows on Europe’s response, Gold pares gain

European equities and US futures rose from session lows after the ECB boosted its Pandemic bond buying program and extended it through June 2021.  The DAX and Euro Stoxx 600 are starting to look much more attractive following Germany’s new stimulus package and the ECB’s increased pandemic purchase plan, both which have exceeded market expectations. 

US stocks gave back all of the ECB driven gains after US continuing claims unexpectedly rose.  Early evidence seems to suggest the US economic recovery will be much slower that initially expected.  Hopes were high following a solid May ADP report that the US economy was bouncing back strongly, but this weekly jobs reading derailed that theory. Tomorrow’s non-farm payroll will provide greater clarity as to how much damage occurred in the labor market last month. The labor market recovery will not be quick, but it will help somewhat if the baseline unemployment rate is not well above the 20% level.

Risk appetite was also dealt a blow as the Trump administration seems to be moving closer on adding media from People’s Daily, CCTV, and Global Times to the foreign-mission list (Making the outlets declare their personnel and property in the U.S).  The tit-for-tat responses between the US and China are not easing up at all and eventually this will weigh much more on risk appetite. 


The euro rose after the ECB sent a message that they are making sure they are providing a safety net for the economic recovery and to assure steady financial conditions.  Financial markets were happy with the ECB’s decision of a 600 billion euro increase to Pandemic bond buying program (PEPP) and extension to June 2021.  Analysts widely expected a 500 billion increase but were not expecting the ECB to signal how they were reinvesting PEPP bonds.  The decision to reinvest PEPP bonds until at least end of the 2022 could suggest they might be done with bond buying. 

Italian and Greek bonds soared after the ECB delivered.  The Italian 10-year bond yield fell 15.9 basis points to 1.391%, while the Greek 10-year dropped 15.0bps to 1.328%. 

The euro gave back much of its earlier gains ahead of the release of the ECB staff projections.  Financial markets can hardly get a handle on how anything will unfold by the end of the summer, so no one will put much weight into the latest forecasts.  The ECB’s baseline scenario for this year is for a decline of 8.7%, while next year will rebound 5.2%. 

ECB President Lagarde kept the pressure on government in delivering strong and timely stimulus measures.  European stocks dropped after she noted that the ECB haven’t yet discussed adding corporate junk bonds to PEPP.   The ECB action was strong, but when Lagarde went into the details investors lost their excitement.  Risk appetite lost momentum since junk bonds don’t appear to be on their radar, the 600-billion-euro increase was not unanimous and the harsh reality the next major stimulus package needs to come from government leaders. 

Financial markets should overall be happy with the ECB and any weakness should be short-lived and seen as a classic “buy the rumor, sell the news” event. 


Crude prices consolidate as energy traders watch OPEC+ drag their feet on extending production cuts. It is a little premature to make the call that unity will be reached as compliance from Iraq and Nigeria has come into question.  The likelihood is that OPEC+ will have a few more rounds of back and forth before all parties settle on something.  A complete breakdown in extending production cuts would just translate into a lose-lose situation, which would make energy markets have to wait several more weeks for tank tops to become an issue again. 

Oil prices got a slight boost following the ECB policy meeting that delivered a larger-than-expected increase to the Pandemic bond buying plan.  This has been a good week for prospects of improving crude demand after Germany announced a new stimulus package and the ECB delivered. The global economic recovery is still headed in the right direction and that should continue to provide some underlying support for oil prices. 


Gold pared gains following the ECB’s bond buying boost as the reality hit that this could be it for them.  The initial reaction to the ECB decision was positive for risky assets and that is why gold softened, but the bond reinvestment plans could mean this was the last major increase of stimulus financial markets will see. 

Gold is still struggling to resume its bullish trend as global markets ponder how many more increases to stimulus can we get as the global economic recovery continues.  Risks to the outlook are plentiful and gold still has many unforeseen reasons why investors still want safe-haven positions.  Gold’s bullish outlook remains intact on trade wars, geopolitical risks, a second wave of coronavirus cases and a low-interest rate environment as uncertainty persists to what will be the permanent damage to the US labor market. 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya