Now focus turns to Trichet who speaks at Jackson Hole tomorrow. Given the chaos in European equity markets, traders will look to him to soften his tone and signal a willingness to cut rates before too long. Clearly, the 50 bp in hikes earlier this year were mistimed, as they were in 2008.
If the ECB is going to cut any time soon, expect it sooner rather than later. The last thing the ECB wants to do is put a new, Italian ECB president in the position of reversing a tightening cycle right out of the gate. Bottom line, if we get a cut, it will come in the next two meetings.
EUR/USD has probed the area of support around 1.4365. More is at 1.4325.