Noted earlier in this morning’s print, rate cuts are now plausible in the European Union, according to recent statements by ECB President Jean Claude Trichet.  In the usual press conference following the rate decision, Trichet noted that recent economic data had showed signs of “increased downside risk” that are “stemming from ongoing financial market tensions.”  This change in economic climate seems to have persuaded central bankers into mulling over a possible rate cut, helping the US dollar in continuing to beat down on the Euro.  The only caveat seems to be the rate of inflation.  Although price pressures have dissipated, as noted by central bankers, the current level continues to hamper any real directional bias in the overall rate decision.  Hitting a record 4 percent annualized rate in the month of July, the yearly inflation gauge has come down a bit, to 3.8 percent.  This is hardly a level that compares with the mandated benchmark of 2 percent set by policy makers.  As a result, even with central bankers noting future rate cut possibilities, the likelihood of such an event may still be a distance away.  The sentiment may spark a near term bottom in the currency pair as it seems oversold at the current moment.  

Tags: ECB, Euro, Trichet

This entry was posted on Thursday, October 2nd, 2008 at 10:00 am and is filed under Currency Trading, Economic Indicators, Euro. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.