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Market Review - 15/01/2009 19:24 GMT
Euro tumbles to 1.3025 as Trichet signals more interest rate cut
The single currency declined on Thursday to a one-month low of 1.3025 and 116.24 against the dollar and Japanese yen respectively as European Central Bank President Jean-Claude Trichet signaled policy makers are not finished cutting interest rates.
Euro traded in a volatile manner after ECB lowered its main refinancing rate by 50 basis points to 2% as expected. The single currency rebounded initially to 1.3244 versus the greenback after Trichet said ECB’s next key ‘rendezvous’ will be in March, adding to speculation that ECB may keep interest rate unchanged in February, however, euro tumbled to 1.3025 as Trichet said later in the day that ‘we did not say it was now the limit and we would not move any more’.
A widening spread between the two-year and 10-year German government bond yields suggested investors increased bets that the ECB will be forced to make further cuts in borrowing costs.
The greenback fell initially to 88.48 on risk aversion due to the selloff in global stock markets before rebounding to 90.04 as U.S. stocks rebounded in late NY afternoon after Fed Board Nominee Daniel Tarullo said deflation is more of a concern at the moment than inflation and indicated the central bank's strategy for unwinding its various lending programs and adjusting monetary policy would be an 'exercise in innovation'.
Friday will see the release of eurozone trade balance, U.S. CPI, real earnings, foreign treasury buys, net long-term TIC flows, industrial production and University of Michigan survey.
Euro tumbles to 1.3025 as Trichet signals more interest rate cut
The single currency declined on Thursday to a one-month low of 1.3025 and 116.24 against the dollar and Japanese yen respectively as European Central Bank President Jean-Claude Trichet signaled policy makers are not finished cutting interest rates.
Euro traded in a volatile manner after ECB lowered its main refinancing rate by 50 basis points to 2% as expected. The single currency rebounded initially to 1.3244 versus the greenback after Trichet said ECB’s next key ‘rendezvous’ will be in March, adding to speculation that ECB may keep interest rate unchanged in February, however, euro tumbled to 1.3025 as Trichet said later in the day that ‘we did not say it was now the limit and we would not move any more’.
A widening spread between the two-year and 10-year German government bond yields suggested investors increased bets that the ECB will be forced to make further cuts in borrowing costs.
The greenback fell initially to 88.48 on risk aversion due to the selloff in global stock markets before rebounding to 90.04 as U.S. stocks rebounded in late NY afternoon after Fed Board Nominee Daniel Tarullo said deflation is more of a concern at the moment than inflation and indicated the central bank's strategy for unwinding its various lending programs and adjusting monetary policy would be an 'exercise in innovation'.
Friday will see the release of eurozone trade balance, U.S. CPI, real earnings, foreign treasury buys, net long-term TIC flows, industrial production and University of Michigan survey.
