The EUR/USD tumbled more than 100 points in the aftermath of the ECB press conference by President Jean Claude Trichet in which he offered no additional accommodative measures to address the growing sovereign debt crisis in the region and instead put a soft target end date on the central banks unlimited tender offer. The euro started to fall once Mr. Trichet stated that the tender will be extended at least until April 12 th , suggesting that the ECB may consider exiting its accommodative stance at that point. Given the fragility of the credit markets in Europe, Mr. Trichet words only helped to exacerbate the state of panic amongst investors and instantly put downward pressure on the euro.
Mr. Trichet displayed his usual tone deafness to the market, focusing once again on the central banks' commitment to price stability rather than addressing the financing issues plaguing the members in the periphery. He placed the responsibility on dealing with financing problems squarely on the shoulders of EU fiscal officials and noted that EZ debt to GDP ratio will be at half of that of US and Japan in 2011, as defense of current policies.
Nevertheless, the currency market clearly did not like his message fearing that the ECB may once again be caught flat footed by the shorts and could be slow to react to the growing fears of contagion. Some analysts have noted that if Portugal were to follow Ireland's fate the EU may not have enough capital left to rescue Spain. Still for now the credit markets appear to have stabilized and that calming effect has provided support for the euro. After dropping through the 1.3100 level, the pair has been able to recover but remains under pressure in North American trade. However, if equity markets begin to sell off and risk appetite wanes as the day progresses the pair could target the 1.3100 level once again.