Jean- Claude Trichet, President of the European Central Bank (ECB), left interest rates unchanged as expected at 1.25%.
The EUR/USD fell 100 pips during the press conference even though Trichet expressed strong vigilance which normally is a bullish sign of raising rates soon. The price action in the EURO seems to be following the old adage in trading, 'buy the rumor, sell the news'.
Here are some of the important comments made by Trichet:
- Continue to see upward pressure on overall inflation
- Monetary analysis indicates that underlying pace of monetary expansion is gradually recovering
- Strong Vigilance warranted, using phrase that in past has signaled rate hike a month away
- Risks to inflation outlook remain on upside
- Determined to secure anchoring of inflationary expectations in EURO area
- Rate decision was unanimous
- GDP growth in 2011 1.5% to 2.3% range versus 1.3% to 2.1% range in March
- Inflation rates are likely to stay clearly above 2% over coming months
- Important that US in favor of strong Dollar
- Strong Dollar in US and global interest
- It's mistake to embark on measures sparking default
- Ireland has benefit of flexible economy, verbal discipline is probably appropriate
- It's clear that European issues are important
- Problems at stake are very serious; Europe has a balanced current account
- No objection to Draghi as next president; Draghi is person of recognized standing
EUR/USD is currently trading at 1.4483; next support level is 1.4377 weekly pivot which is also the 55 daily SMA.