Market Update
The EUR/USD pushed to new highs on Thursday, with the market feeling pretty good about the Eurozone economy as the German jobless rate ticked lower, money growth remains a bit too high for the ECB’s comfort, while the US economic data remains patchy. The ECB’s Trichet was on the wires suggesting that it was too early to gauge the impact of the subprime crisis on the Eurozone economy, while also saying that the uncertainties to the ECB’s forecasts have increased. US new home sales will be key later today, see if this continues to slump as the market expects, which will keep the USD under pressure if seen. Fed speakers later on will be interesting, especially if they try and ringfence the subprime woes and hint that the 50 bp rate cut will not automatically be followed by further rate cuts – the data will need to really soften for the Fed to start cementing in the view that further rate cuts are a ‘done deal’. The ECB confirmed that the lent 3.9bln eur at the penalty rate on Wed., suggesting that liquidity is still a problem, and banks continue to be wary of lending. On the charts, same risks as before – $1.43+ in the EUR seems open, 1.41 now offers support.
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