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Mr. Trichet’s Comments And The Euro

Written by A Forex View From Afar on Wednesday, April 29, 2009

The currency market continued to march inline with the S&P futures today, as has been the case lately. S&P futures, together with the overnight spot equity markets can be a very good gauge of the overall risk-aversion phase, which tends to have a strong influence in the currency market.

However, the euro had a slightly different pattern during the overnight session. The main reason seems to be recent comments made by Mr. Trichet, which declared that lowering interest rates is not always the best path to fight a global recession.

“In other words, Mr. Trichet re-affirms what the ECB members had been saying lately, that the key interest rate may not be going lower than 1%” TheLFB-Forex.com Trade Team said. “This, in turn, had a strong effect in the currency market, since the spread between the Fed and the ECB is likely to remain at the current level,” they added.

Moreover, Mr. Trichet showed his support for the ECB actions, saying again that different situations require different actions. In the past meetings, the Chairman of the ECB has stressed empathy for the inter-banking markets, which are lower in the U.S. on short-term maturities, but on the long term, yields are lower in the Euro-area.

“It appears as though it was Mr. Trichet’s comments, in part, that helped the euro be the best performing currency of the day, after on Monday the single currency was sold heavily,” TheLFB-Forex.com Trade Team said. “On positive equity markets, the euro might advance in the coming days, as the Fed appears ready to print additional dollars, while the ECB looks resilient,” they added.

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Fundies and Trading
There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

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