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Euro Rallies Following ECB Statement

Further European Central Bank funding, announced by the president, Jean Claude Trichet, has helped the euro but one can only wonder for how long with interest rates remaining at 1%...

The news came following the ECB’s decision to keep rates on hold at 1%. The liquidity remains on offer despite fewer bids than expected during this month’s 3 month refinancing operation where ‘only’ €131bln against a forecast of €200bln bids was required. A positive move for Eurozone and the Euro however Trichet stated it should not be read as any kind of monetary policy signal.

The ECB left its key refinancing rate unchanged at 1.0%, they the deposit rate which is the floor for euro money market rates at 0.25%, and the marginal lending rate which is the ceiling at 1.75%. The positive sentiment has continued the Euro’s rally and is now trading at GBP/EUR: 1.1957 and EUR/USD is approaching 1.27s at 1.2693.

Disclosure: long euro