Sunday, March 20, 2011

EUR Hits 2011 High as Trichet Re-affirms ECB Rate Hike in April

In a speech today, Trichet helped support the Euro, as he iterated
that the ECB continues on its path of hiking interest rates. When
asked about a possible April rate hike, he said the ECB's message has
not changed.


From Bloomberg: Trichet Says His Message on ECB's Rate Stance Hasn't

European Central Bank President Jean-Claude Trichet indicated the
bank still plans to raise interest rates next month, saying he doesn't
want to change his message on the need to contain inflation.

"I have nothing to add, nothing to withdraw," Trichet told reporters
today in Frankfurt when asked if policy makers are still in a posture
of strong vigilance, ECB code words for an imminent rate increase. "No
new message at all," he said.

Positive developments in the form of UN action against Libya and G7
intervention to weaken the Yen helped equity markets stage another
rally, clawing back losses suffered earlier this week.

The return of risk appetite, if you can call it that, did not favors
for the greenback. The dominant theme prior to the Japanese earthquake
was the interest rate differential between the ECB and the Fed. Europe
is more aggressive in halting rising inflation, while the Fed sees
underlying inflation still low and the need to support the US economy
and employment through lower rates.

That different will mean interest rate differential favor the Euro at
the current moment, and heading into the weekend, the market loaded up
on EUR/USD longs.

Source: ActionForex.Com

No comments: