ECB’s Weidmann: German economy has passed low point of coronavirus crisis

In an interview with German newspaper Frankfurter Allgemeine Sonntagszeitung over the weekend, the European Central Bank (ECB) Governing Council member and German central bank President Jens Weidmann said that the economy has likely bottomed out and is expected to recover gradually.

Key quotes

“The low point should be behind us by now and things are looking up again. Following the sharp slump, we only see a comparatively gradual recovery,”

“The state aid was a legitimate tool for boosting the economy to help healthy companies survive.”

“It goes without saying that I will maintain the confidentiality of the ECB council meetings. I would, therefore, be pleased if the Bundestag takes the initiative and invites me again to a dialogue.”

The ECB needed to be ready to shift course as the situation changed, saying that “once the normalization of monetary policy with a view to price development becomes necessary, it must not prevent out of consideration for the government’s financing costs.”

Market reaction

With the US dollar testing over two-week tops against its main peers amid broad risk-aversion, EUR/USD meanders near multi-week lows of 1.1168, at the time of writing.

Despite Weidmann projecting a gradual recovery, the resurgence of the coronavirus new infections in Germany, with the reproduction rate shoot to near 3.0 levels, has renewed concerns and could likely weigh further on the shared currency.