The market was curiously waiting today for Trichet's press conference after the ECB meeting today which took the decision to keep the interest rate unchanged again at 1% as expected to know more about its buying bonds plans and its current policy in the face of the debt crisis amid the falling of the single currency across the broad which effected negatively on the investors recently.
Trichet has not surprised the market with any new comments he has assured that the current interest rate is still appropriate and the single currency is a very credible currency instead of its recent falling and the debt crisis however he has shown his increased uncertainty about the growth down side risks over the medium term.
The ECB has shocked the market by not discussing buying bonds from the market in its previous meeting has he has said after it but after conducting the 1 trillion euros package plan with the IMF, we were waiting to know more about the ECB plans and their volumes but we have not had but his comment that this decision was important for supporting the markets without mentioning the how much they have put until now and how far this can effect on the balance sheet of the ECB which will carry what are to be unfolded of bonds from the other banks and what's to be issued and need to be bought for storing confidence in this market especially after the ECB recent released report last Monday which has warned about the long term debt refinancing in Europe which looks in need of 800 billion euros by the end of 2012 suggesting that the European banks are in need to be ready for facing bad loans following the debt crisis which can reach 123 billion euros for 2010 and 2011 to reach 105 for 2011 and for facing the bad loans from 2007 till 2009 they should put be ready with 238 billion euros.
The financing problems have seemed ahead from the ECB report showing a serious need for storing stability and injecting funds into the nerves of the European banks too as the European governments which can transfer the problem to the balance sheet of the ECB threating the single currency.
The market has not got any new clue too about conducting the suitable monetary policy of the Euro for the European countries which are in safe from the debt crisis facing just negatively impact of it like Germany, France and Italy and the countries which are facing actually unsustainable debt position risks and in need of supporting like Greece, Portugal and Spain right now but mentioning again that the current interest rate is still appropriate and expected to be hold further at this level relying on the expected austerity measures which waited to be taken by these countries to lower their budget deficit.
But he has succeeded to calm down the markets worrying about the single currency by stressing on that the single currency is very credible currency in spite of the crisis showing that it is still well-independent for containing inflation over the medium term in spite of its recent massive falling across the broad. The single currency could get above 1.21 after the press conference versus the greenback which was under pressure by gaining in the equities markets by the beginning of the US session after better than expected US jobless claim underpinned by Ben Bernaneke recent comments earlier this week which could add to the market confidence in the US recovery in spite of the crisis in Europe expecting US to grow by 3% to 4% this year as he has repeated in his testimony in front of the house budget committee although he could not hide his worrying about the current debt unsustainable position showing that it was inevitable for getting out of the recession.
Walid Salah El Din