ECB’s Trichet Will Try to Steady Euro Investor Confidence

The European Central Bank is expected to hold its benchmark interestrate steady at 1.00% this morning. In addition, look for it to issue astatement saying that rates will remain low for quite sometime because of thefiscal problems in several Euro Zone nations and the risk of contagion.

The European Central Bank is expected to hold its benchmark interestrate steady at 1.00% this morning. In addition, look for it to issue astatement saying that rates will remain low for quite sometime because of thefiscal problems in several Euro Zone nations and the risk of contagion.

Because so much money is being set aside to bailout Greece and additional funds may be needed tosupport the economies of Spainand Portugal,the ECB cannot afford at this point to begin raising interest rates withoutrisking a possible double-dip recession.

With a few major nations raising rates or set to raise theirbenchmark rates in the near future and the ECB set to hold rates steady,traders will continue to sell the Euro because of the interest ratedifferential.

Following the release of the ECB policy statement, PresidentJean Claude Trichet is expected to try to instill confidence in the Euro duringhis post-meeting press conference. In his talk, he may address the possibilitythat the ECB is considering buying government bonds or diverting financialstimulus from other parts of the economy to address the fiscal needs of thestruggling nations.

Whether Trichet will be successful at persuading investorsto continue to back the Euro cannot be determined at this time. What is known,however, is that hedge funds and large speculators are committed to theshort-side of the market at this time and not expected to lighten up becausethe fundamentals clearly support a weaker currency.

Analysts continue to feel that the worst is yet to come asthe capital markets in the Euro Zone continue to run out of control. Many feelthat the ECB has been behind the curve and that the ECB hasn’t acted fastenough to stem the Euro’s downfall.

Last night the Euro reached its lowest level since March2009 while piercing the 1.28 price level. Today, more unrest is expected in Greece as thegovernment and protesters clash about the implementation of austere financialmeasures. With the situation worsening, the ECB may have to consider what manysee to be a drastic measure, and that is buying the sovereign debt of theailing Euro Zone nations in the secondary market.

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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