(menafn – ecpulse)
Today, the main focus will be on ECB's second round of Long-Term Refinancing Operation (LTRO) after the launch of LTRO 1 in December in a step from the ECB to support banks through providing them with liquidity.
The ECB will allot a second tranche of three-year loans, where European banks are expected to take up to 500 billion euros of three-year funds from the ECB in a step that may lengthen a rally in bond markets.
Banks will now be “more inclined to use this money -- which was our primary expectation really -- to expand credit into the real economy,” ECB President Mario Draghi said following the G20 meeting.
Draghi stressed previously on the importance of the LTRO in fighting debt crisis as it provides cheap funds, where it gives an indication to the degree of tightness in funding markets.
Italian and Spanish banks are predicted to be strong candidates for borrowing more than other banks like what happened at the first auction.
One of the consequences of the allotment is boosting demand for the region’s assets, while the effect on the market is predicted to be bearish.
The 17-nation currency is currently trading near 3-month high versus the greenback around 1.3470 after opening today's trades at 1.3456.
Meanwhile, euro area policy makers are trying to ease debt crisis through launching decisive measures.
Regarding fundamentals, euro area CPI for the year ended January will linger at 2.7%, while German unemployment will steady at 6.7% in February, according to median estimates.
Moreover, the Greek Parliament approved 3.2 billion euro of spending cuts this year with a majority of 202 versus 80, noting that today there will be another voting on measures demanded by the EU and IMF, such as permanent changes to pension funds and health-care spending, to receive a second bailout approved by the euro area on Feb. 21.
This week, German Parliament managed to pass a Greek second bailout law after winning a majority of 496 versus 90 while 5 abstained. Merkel warned lawmakers that if Greece left the euro area this would endanger the euro region and lead to various negative economic repercussions.
Before the EU summit this week, Germany is under mounting pressure to combine both powers of the remaining 250 billion euros in the European Financial Stability Facility (EFSF) and the 500-billion-euro European Stability Mechanism (ESM), due in July, to have a total of 750 billion euros; the thing which was opposed by Germany in more than occasion.