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Daily FX Commentary

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Daily FX Commentary

Fri, Mar 20 2009, 21:20 GMT

Investica Ltd


Pressure for ECB response

The comments from ECB officials will also remain under very close scrutiny in the short term. Following the Federal Reserve move to expand quantitative easing, there will be additional pressure on the ECB to also adopt non-conventional policy moves or cut interest rates even more aggressively.

There is still likely to be very strong resistance to such moves from many members of the bank council, especially given the bank’s historic aversion to any policies which could risk an increase in medium-term inflation.

The ECB comments are liable to trigger further volatility given the importance of direct credit measures for currency sentiment. If the ECB holds firm, then the Euro should maintain a robust tone in the short term.

The Euro consolidated around 1.3650 against the dollar on Friday before retreating to 1.3550.  Trends in risk appetite will also need to be watched closely and the Euro’s correction will gather pace if there is renewed downward pressure on global stock market sand renewed fears over the banking sector.

Published on  Fri, Mar 20 2009, 21:21 GMT


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Investica Ltd http://www.investica.co.uk | tim.clayton@investica.co.uk

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