Jean-Claude Trichet talks about the rate decision and keeps the tension high. He is slightly less hawkish and doesn’t hint about future moves. Update. EUR/USD is now below the critical line, after very choppy trading.
The press conference has ended. All in all, Trichet hinted that no rate hike is coming in the next meeting and wasn’t bullish enough on more rate hikes in upcoming months, although he did leave the door open.
“Buy the rumor sell the fact” indeed happened, although the scale is limited. EUR/USD is weaker, but it could resume the uptrend later in the day.
These were the live updates
12:36 Trichet says that the ECB will continue to monitor the situation very closely. He doesn’t use the code words “strong vigilance” in the opening statement. EUR/USD at 1.4290, very choppy.
12:40 Trichet begins to detail the situation, speaking about the amount of money in circulation. EUR/USD rises above 1.43.
12:42 Risks to prices remain. Policy aims to reach target of 2% or lower. He repeats text stated at the beginning of the statement.
12:45 Trichet asked if a series of hikes is expected now. Decision was taken unanimously. He says that the bank did NOT decide about a series of hikes. He says that the council will continue monitoring the situation. I would say that he avoided the question. EUR/USD at 1.4295.
12:50: EUR/USD Stabilizing under 1.43. Jamie Coleman says “Looks like he has endorsed the view of more hikes to come, but not at every meeting”
12:53: Trichet says that inflation hurts the poorest EU citizens and that governments should be fiscally “vigilant”. So, vigilance is relevant to fiscal policy, but not monetary this time.
12:59: Relaxed Trichet now moves to answer questions about the banks. EUR/USD at 1.4260 – significant fall.
13:00 Important question – are the markets right to assess that more hikes will happen later in the year, not in the upcoming month. Trichet avoids answering – “take all appropriate measures over time”. He does provide an answer for a question above Ireland.
13:03 He says that the ECB will do whatever is necessary. He said again that they didn’t decide that this was the first in series. This repeat sends EUR/USD down to support at 1.4250.
13:05 He says that no central bank leads and another follows – they are just doing their job. This was an answer to a question stating that this is the first time that the ECB begins the cycle before the Fed.
15:09 Irish bank recapitalization questions are now heard. He is challenged with a question hinting that the rate hike will hurt the people of Ireland. Trichet answers that it is the interest of the whole of the EMU to have a lower inflation rate. EUR/USD is stable above 1.4250 – it found support there.
15:13 A Japanese reporter asks about the earthquake, the implications of the nuclear disaster on the oil prices. EUR/USD dips below 1.4250 but rises back up. Trichet says that there was a strong immediate impact on global growth. He doesn’t dive into talking about oil prices.
15:16 Challenging question about the ECB leaning too much towards Germany and not the other countries. Trichet reminds everybody about the first years of the Euro, when Germany was called the “sick man” of the continent. He says that ECB thinks about everybody. EUR/USD ticks up to 1.4260 and down again, above 1.4250. Stabilizing.
15:18 Q: Is one hike enough to tackle inflation? Trichet reiterates that no decision was taken on a series of rate hikes, and that price stability in the medium term.
15:20 Trichet says that second round effects haven’t been seen in inflation, but that the bank will stay “extremely alert” about avoiding second round effects.
15:22 M3 is growing slowly, but it has been overblown in the happy days.
15:24 Q: Why would oil and commodity prices reach “core inflation” – Trichet says it’s important to avoid second round effects. EUR/USD at 1.4260.
15:28 EUR/USD rises back to 1.4271. Questions about Irish banks are now discussed.
15:31 Regarding Portuguese and Irish collateral, Trichet refuses to answer. Prices are stabilizing as the press conference nears an end. Note that Trichet sometimes surprises towards the end.
15:36 Again, a French reporter asks about the rate hurting the peripheral countries. Trichet says this policy will help all 331 million inhabitants of the Euro-zone.
15:42 A Spanish reporter asks about the situation in Spain – Jean-Claude Trichet says that Spain still needs to do more – reforms that are in the pipeline.
15:43 Press conference ended with Euro/Dollar at1.4270, under the resistance line of 1.4282 and above 1.4250.
In US news: Jobless claims stand at 382K in the past week, within expectations of 382K and only slightly lower than last week’s 392K (revised up from 388K).
For technical levels, analysis and upcoming events, see the EUR/USD Forecast.
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