ECB President Jean-Claude Trichet left the interest rate unchanged and didn’t lift the tone. He said that the central bank is closely monitoring the inflation, but that it remains contained. EUR/USD lost support.
There were expectations that Trichet would lift his tone against inflation, hinting that the rate rise will come sooner than later. Regarding price development, Trichet puts the blame on higher energy prices. He says that inflation will be above target throughout 2011. Though, he emphasizes that this doesn’t change the assessment of the ECB.
After the ECB stopped buying bonds, there were expectations that this is a preparation for a rate hike, and that Trichet would up his tone. So, his words in the press conference are a disappointment.
EUR/USD now trades at 1.37, falling off the 1.3760 support line. The current level of 1.37 is a significant support line. If it is lost, further support is found only at 1.3576 and 1.3440. Above, 1.3760 now turns into resistance, followed by 1.3830.
Update: 1.37 lost – Euro/Dollar at 1.3680. Regarding the bond buying program, Trichet said that it is going on as usual, denying that it has stopped and that a rate hike is coming soon.
In additional news, US weekly jobless claims came out marginally better than expected – 415K instead of 420K. So, the main factor weighing on the Euro is Trichet.
Also the situation in Egypt isn’t good for the Euro – fresh violence has erupted in the last hour, and there are reports that journalists were arrested. One local journalist, Shahrira Amin, quit the Egyptian state television, refusing to broadcast propaganda, according to her words.
There are worrying reports of gunfire in Tahrir square. The crisis in Egypt is becoming ugly.