FXstreet.com (Barcelona) - Euro and Pound are trying to recover after rather considerable sell offs moments after their respective Central Banks released their monetary policy decisions; the Euro suffering a stronger selling pressure as Trichet admitted the possibility of further rate cuts.
As expected, the Bank of England Has cut rates by 50 basis points to 0.50%, the ECB trimmed its Repo rate by the same amount, 50bp too 1.50%. Both Euro and British Pound posted drops of around 80 pips after the decisions were released.
On the macroeconomic front, U.S. Jobless Claims have remained at very high levels, whole factory orders have posted softer than expected decline.
GBP/USD has dropped to minimum levels of around 1.4060 after the BoE's announce to recover above 1.4090 level afterwards. The EUR/USD has dropped from 1.2565 through support lines at 1.2550 and 1.2515, and advances towards March 4 low at 1.2460.
The Euro fell at a more aggressive pace due to Trichet's press release, according Kathy Lien, Director of Currency Research at GFT,: Euro has sold off more aggressively than the British pound because ECB President Trichet warned that growth will be significantly reduced in 2009 and 2010 while inflation will remain well below 2 percent. More importantly, he admitted that the ECB is studying non-standard measures which include quantitative easing.
Furthermore , the Euro could trade under selling pressure as, according to Lien, Trichet opened the doors for further rate cuts: By saying that they have not made a decision about whether 1.5 percent is the lowest level makes 1 percent interest rates a real possibility for the Eurozone. In fact, Trichet may opt for another rate cut before credit easing. For the US dollar, British pound and Japanese Yen, no surprises are expected from future rate decisions. However for the Euro, the prospect of lower interest rates and the uncertainty of if and when the ECB will adopt credit easing should keep the EUR/USD under pressure.