During the coronavirus the outbreak has been damaging various aspects of the world, including the economic sectors. For example, further rate cuts by the ECB naturally make major changes in the German economy. The following are essential pointers of Euro cut-rate and its impacts.
There are some very interesting precedents. First, the ECB is expected not to reduce its discount rate, but to reduce the deposit costs paid to banks that immediately deposit playground money with the ECB. Since the initial low rate of 0.25% will decrease and 0% immediately, the planned cuts will halve the current discount rate and cause the night rate’s disadvantage. As a result, the ECB will probably charge the banks for the custody of the bank deposits. This pattern like wenig wie im Casino mit schneller Auszahlung (little like in the casino with fast payouts)
Secondly, the euro foreign exchange market’s internal functioning will likely weaken before the expected drop in interest rates. In the long term, the interest rate cut should reduce euro property’s attractiveness for investors seeking a return. We will analyze these two situations, like the previous subjects in the macro phase, while the latter is an immediate business opportunity.
Germany, which accounts for about 30% of the eurozone production, has the most protected member countries’ economy. The economic collapse has allowed traders to buy the most selected companies only at bargain prices. The search for returns on deposits, together with industrial returns on equities, has led to an increase in cash holdings in euros of almost 15% in recent decades.
The cuts planned by the ECB should avoid deflationary pressures, as the fruits of the eurozone crisis have been reaped, and these investments have begun to ripen. The impact of overnight interest rates becoming negative may significantly affect the monetary easing that the ECB considers necessary in the southern parts of the European Union, forcing medium and local banks to earn money available to boost economic expansion in this particular region within the eurozone.
Economic experts believe that the unfavorable interest rate on cash could serve this purpose. Nevertheless, some conditions make speed reduction; the euro cash might not decrease as expected. The euro currency market’s internal functioning should weaken until the speed is reduced. In the long term, euro cash holders will receive fewer refunds for keeping the cash after the reduction.
The short-term consequence of this situation is the ideal configuration for our industrial trading method. The economic trend has strong net trading dynamics and a strong propensity to buy. It is expected that the first announcement will lead to a sale, which will put the euro into oversold in the short term so that people can buy at a discount and take advantage of the expected appreciation next month.