Jean-Claude announced new liquidity measures, for the longer terms and also a new covered bond program. He repeats the same assessments about growth and inflation. EUR/USD is rising very moderately in his last press conference as the president of the ECB. His final decision after 8 years was to leave the interest rate unchanged at 1.50%.
Trichet calls for more fiscal consolidation and also for the banks to take measures. EUR/USD temporarily recaptured 1.33 but retreated. It is trying to recover from the really big move announced in Britain. Live updates. Will the euro eventually change course on these weak decisions?
Live Blog
12:08 GMT Pre-conference: All times are GMT. EUR/USD is falling to 1.3263.
12:20 pre-conference EUR/USD continues lower to 1.3250.
12:30 Trichet enters the room. EUR/USD at 1.3266. Where will it go from here?
12:33 Still waiting for Trichet. He’s keeping us tense…
12:36 Press conference begins. EUR/USD a bit higher. Opening words from German head of central bank.
12:38 Weidmann praises Trichet and talks about the achievements of the ECB.
12:41 Trichet finally begins talking: Inflation has remained elevated: to remain high and to fall afterwards.
12:42 Uncertainty to growth remains high. EUR/USD slides a bit
12:43 Long term LTRO Announced as expected: 12 and 13 months.
12:44 Operations will remain as long as needed.
12:46 3 month operations will continue.
12:46 New covered bond program – EUR/USD jumps!
12:46 Size of program, 40 billion euros. Details to be provided at the next meeting (headed by Draghi).
12:47 EUR/USD loses some of its gains and falls below 1.33 once again as Trichet lays out downside risks to growth and high uncertainty.
12:49 Trichet says that inflation will remain high in the upcoming months but will fall later. He acknowledges the role of oil prices in this mix. Inflation risks are balanced.
12:50 Trichet mentions problems in money markets.
12:52 The situation of banks is worrying. ECB calls banks to take action strengthen their capitla basis. EUR/USD drops.
12:54 Trichet calls governments to re balance, especially the bailed out countries. More austerity?
13:00 Trichet concluded with some personal words. Questions phase begins.
13:01 Asked about cutting the rates, Trichet talks about “non-standard measures” – the liquidity measures.
13:02 He continues refusing to provide hints about future rate moves.
13:03 He continues defending the success of the ECB regarding price stability and separates from non standard measures.
13:05 Trichet pushes the EFSF back to the governments. No ECB leveraging.
13:06 EUR/USD now sliding lower. Rate decision made by consensus.
13:10 EUR/USD continues lower as the liquidity steps are not too impressing.
13:12 Trichet insists that the governments apply the July 21 agreements. “We cannot substitute ourselves to governments”.
13:14 Asked in French about bond buying, and when do you lose your sleep at night? Trichet says that the bank intervened several times, since 2007.
13:19 How many were in favor of a rate cut? Trichet only provides a general answer. So, were there some votes for a rate cut?
13:25 Trichet defends Juergen Stark, despite the fact the he quit…
13:33 Trichet compares the change in balance sheets between the US, UK and the euro-zone.
13:35 “We are only passing messages” (not dictating to governments). EUR/USD moves higher.
13:36 “We saw that it was a global financial crisis since the beginning”
13:41 Trichet takes some pride for having a lower inflation rate during his work as the head of the French central banks. EUR/USD moves higher to 1.3335.
13:45 Press conference ends with warm words for Draghi. EUR/USD ends it higher.
Background
The intentions of the ECB are usually clear. This time, there was more room for speculation, that ranged from a 50 basis points cut to nothing at all. The hawkish decision to leave the rates unchanged wasn’t cheered as the situation in the euro-zone is deteriorating quickly. The ECB will probably justify this decision by the surprising jump in inflation in September. See the ECB preview for full background.
Another weight on the euro came from Britain: the central bank made a very dovish decision: an expansion of 75 billion pounds in the QE program. The euro followed the pound with a fall.
EUR/USD lines: 1.35, 1.3430, 1.3360, 1.3285, 1.3225 and 1.3145. For more on the euro, see the euro dollar forecast.
In the meantime in the US, weekly unemployment claims printed 401K, a bit better than expected. Also as predicted, last week’s numbers were revised to the upside, 395K from 391K. This provides a bit of optimism.
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