Shutterstock photo
Markets

Trichet Strikes a Neutral Tone Sending EUR/USD Below 1.40

Shutterstock photo

Shutterstock photo

Mr. Trichet downgraded 2011 GDP estimates to 1.4% to 1.8% growth rate from previous 1.5% to 2.3% forecasts. He also stated that "particularly high uncertainty" exists with respect to growth estimates with downside risks predominant. However, Mr. Trichet demurred on the possibility of rolling back the recent interest rate hikes, as the ECB clearly wants to see more data before changing course on monetary policy. In fact, "uncertainty" was the most common word uttered by the ECB chief as European monetary authorities grapple with visibility of economic conditions into the year end.

The neutral stance of the ECB may be negative for the EUR/USD from several angles. The refusal to ease monetary policy suggests that business conditions in the region will remain challenging into the year end and are likely to prove negative for risk assets. On the other hand the clear move towards a pause in the interest rate hiking cycle will make EUR/USD less attractive on the yield basis.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

ForEx

Latest Markets Videos