ECB Rate Cut Below 1% May Not Be Necessary

The Euro rallied on Thursday following the release of a better thanforecast Index of European Services and Manufacturing Report. This newstriggered a strong short-covering rally while sending a signal to theEuropean Central Bank that an interest rate cut to below 1% may not benecessary.

The Euro rallied on Thursday following the release of a better than forecast Index of European Services and Manufacturing Report. This news triggered a strong short-covering rally while sending a signal to the European Central Bank that an interest rate cut to below 1% may not be necessary. The recent weakness in the Euro had been triggered by uncertainty regarding whether interest rates would fall below the 1.0% level. Today’s news seems to clarify things.

The reaction by traders today came as a surprise because the economic report indicated more weakness but traders decided to find something optimistic in it by noticing that the rate of the decline was less than the previous month. The bottom line is that this was still a bad report which means the Euro Zone economy is likely to continue to weaken.

Some want to believe that the economic slump is easing but I hesitate to reach this conclusion until I can see an uptrend by key economic indicators developing especially in housing, employment and production.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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