The ECB lowered rates by 50bp to 2% in line with market expectations and the euro started to weaken in the aftermath of the announcement as traders awaited the ECB press conference scheduled for 13:30GMT.

The critical factor in determining the EUR/USD near term direction will be Mr. Trichet assessment of the EZ economy going forward. If, as many obsrevers believe, he will begin to acknowledge the severity of economic contraction in the region and signal further rate cuts to come, teh unit is likely to come under more pressure for the rest of the day possibly testing the 1.3000 barrier.

We will return with more analysis after Mr. Trichet's press conference.