Trichet Turns Dovish; Traders React By Selling the Euro

By James A. Hyerczyk
03 July 2008 @ 04:42 pm EDT

The ECB hiked its benchmark interest rate to 4.25% as expected in an effort to stem accelerating inflation. ECB President Trichet, however, turned dovish about future interest rate hikes by stating that the ECB had "no bias" or "precommitment" to future interest rate hikes. This comment caused massive liquidation selling in the Euro as traders were forced to lighten up positions they had been building for more bullish news.

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