Currency news - Pressure on ECB

Pressure on ECB - 02-10-08

The Euro to below the 1.40 level on Thursday with a move to 2008 lows near 1.3850 before a slight correction.

Funding pressures eased slightly at the beginning of the third quarter, but there were still very substantial stresses. The underlying dollar shortage persisted on market de-leveraging and this remained an important positive US currency factor as technical demand for the currency remained strong.

The US Senate approved the US rescue plan and the focus will switch back to the House which is due to vote again on Friday. Markets will continue to monitor negotiations closely and signs of a deal would tend to improve risk appetite which could also tend to weaken the US currency against European currencies.

There will be increasing pressure on the ECB to shift policy and move quickly towards a policy of lowering interest rates. The ECB decision and press conference will, therefore, be watched very closely on Thursday. There is certainly a possibility of a rate cut, although this would probably only be sanctioned by the ECB at this stage if there was a global move by the key central banks to co-ordinate rate cuts.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

Full list of daily currency analysis

This analysis report is intended for distribution to ACM Advanced Currency Markets SA private, corporate customers and members. Information contained in this report is based on data obtained from sources considered to be reliable, however, no guarantees be made by ACM Advanced Currency Markets SA as to the accuracy, timeliness and completeness of the data. The opinions and forecasts contained herein are subject to change without notice and ACM Advanced Currency Markets SA accepts no liability for any losses, damages and/or expenses incurred arising from or in any way connected with the utilisation of all or part of this report. This report is meant for information purposes and is not intended to be and should not be construed as an offer or solicitation to buy, sell foreign exchange or indeed any other financial instruments. This report, or any part of it may not be reproduced or distributed without the prior consent of ACM Advanced Currency Markets SA.