The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3315 level and was supported around the $1.3160 level. Euro bulls are talking about pushing the common currency to the $1.3475 level. Traders await today’s Federal Open Market Committee interest rate decision with most expecting the Fed to announce some new measures to ease credit strains. It is possible but not probable that the FOMC will talk more about paying the long end of the Treasury curve or even shorter maturities. A more realistic scenario entails the Fed announcing mortgage restructuring initiatives, especially after the Fed submitted a new proposal to Congress to reduce home foreclosures. In eurozone news, provisional January German consumer price inflation for three German states came in less-than-expected, suggesting price pressures continue to abate in the eurozone’s largest economy. This would offer the European Central Bank additional scope to ease monetary policy with less fear of engendering inflation. French January consumer confidence improved to -41, its best level since April 2008. Additionally, German February GfK consumer sentiment was unchanged at 2.2 from January’s revised print of 2.2. ECB member Gonzalez-Paramo reported Having been able to anchor inflation expectations gives us room to act in an appropriate way; that is, go in the other direction, in the direction of cutting interest rates, which is what we have done. Bank of Spain today predicted EMU-16 inflation would approach 0% by the middle of the year. Euro bids are cited around the US$ 1.2475 level.
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