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ECB: Trichet Moves To More Neutral Bias

As was expected, the European Central Bank left rates at 4.00 percent last Thursday, but it was ECB President Trichet's press conference that garnered all of the attention. In his commentary, Trichet dropped the phrase noting that monetary policy remains "accommodative," and instead said that the central bank "stands ready to counter price risks" as "more information is needed to draw rate conclusions." In this, we can judge that Trichet & Co. are far less hawkish than in previous months amidst a combination of downside risks to growth along with upside risks to inflation. However, the Euro still remains lofty, allowing concerns of its impact on economic growth to percolate:

Jean-Claude Trichet, European Central Bank President

To sum up, a cross-check of the information...has confirmed the existence of upside risks to price stability over the medium term, against the background of good economic fundamentals in the Euro area. Accordingly, and with money and credit growth vigorous in the Euro area, our monetary policy stands ready to counter upside risks to price stability, as required by our primary objective. October 4, 2007

Erkki Liikanen, European Central Bank Governing Council Member

We must ensure that inflation expectations remain anchored in line with price stability. This is essential for sustainable economic growth and favorable employment development. October 8, 2007

Some ECB policy makers are trying to play down expectations for the G7 meeting on the weekend of October 19th, as many are wondering if the ECB or other officials will take the opportunity to talk down the Euro:

Lorenzo Bini Smaghi, European Central Bank Executive Committee Member

An exchange rate policy for the Euro exists, and so does an institutional mechanism to enact it. However, to be effective, the impact on markets of monetary policy must be quick, sudden. To move, it's not necessary to wait for a G7 meeting. October 8, 2007

Didier Reynders, Belgian Finance Minister

Inflation is very much under control. I think that rates should be held at their current level, with a view to relaxing the pressure later in the event of an unfavorable evolution in growth. What strikes me often is to hear ECB officials explain how the situation has changed, how it is worrying, without doing anything. October 3, 2007

DailyFX had some problems yesterday and, as a result, the iFrame with the calendar seems to be reverting to their homepage. Hopefully it will rectify itself with a little patience, otherwise Delboy will have to put Plan B into action.

In the meantime, does anybody know what's meant to be happening today? German Wholesale Price Index beat expectations at 7am and the Japs left interest rates alone.

Here's today's calendar. Remember that times are GMT and not BST.

Thanks Hilary, just so you know you're appreciated.

Have to confess I'm still on a break from Fx, mainly trying to capitalise on my other investments whilst the market's bullish & work very very busy, but will be back by the end of the month.

Seymour,

The thing with FX is that it's a seamless 24/5 operation. Whilst we talk here about 1-hour, 4-hour and daily charts and where it's headed in the days or weeks ahead, you can just as easily use the same chart settings that have been discussed on here and put them into a 1-minute chart for a few bucks before you go to work in the morning or when you're having your dinner in the evening.

For instance, there have been 2 easy trades in cable so far this morning and 3 trades in both fiber and Euro-Yen (albeit the middle trade was iffy, but you've got to be innittowinit). That's all since 7am.

I thought I'd better post on this thread, rather than the day traders - now I've returned to worship at the FUREX shrine. Short from yesterday finally looking good - but I probably need it to get back to 20200 to make up for my FTSE/DOW follies :(

Do try to keep up, meggers. I'm currently long from 10 minutes ago. At least one of us will be right.

:o)

Edit: Stop now moved to entry (2.0339). It's based on the 1-minute chart and will be my last trade of the day as the kids will be home soon. I'll see where it's at a bit later.

Oh Jolly Hockeysticks. Out for a quick half-cent. That's one and a half cents off cable for the day, plus the others. There's life in the old girl yet.

:o)

Edit: Ordinarily I'd have left it to run a bit longer, but I've been at the screens since before 7am, so I'm a bit tired and have had enough for the day.

Nice trades Hils. I'll get trying harder. He who trades Rodney....

16 trades in 3 pairs/crosses today, Seymour. Only 3 whipsaws and some tasty legs in between.



Exactly how Delboy likes it.

:o)

Tasty, very tasty.

I'm nore of a tantric trader Hils - none of this quick in and out for me - makes me dizzy :)

Love n' Peace Kinky Boots

Might be furrily premature - but I'm long cable from that last dip to 330.

Oh well, not tonight then :)

"The dollar was also underpinned by stock market gains earlier, and lost that support when stocks turned around in afternoon trading." (Marketwatch)

Hmm - but not versus sterling.

Traded like a twonk today and broke a few rules. This thinking lark really is a bind.
Left everything on the boil and set limits on 4 trades. Turns out my limit was hit on the nose this afternoon before cable turned down again. Trouble is, I forgot to tick the boxes when I set the limits :(

We still seem to have a problem with the calendar. The URL that I had been using for the last few months was an address which had all of the headers and tabs removed to make it "printer friendly". When DailyFX went down this week, they seem to have removed that URL completely from their website which is why it had been reverting to their homepage.

I've put up a different calendar in its place which covers all of the currencies for that day only. It will refresh automatically each day giving the news as it happens. Unfortunately it has all of the headers there to clutter it up. A weekly calendar is available on their website in PDF or XLS format which can be downloaded and printed if anyone requires.

Thanks for all that Hilary.

I'm still here watching and trading but have had a series of health issues to deal with so not around a great deal.

Thanks for your efforts though.

No problem, H. Hope you feel better soon.

Still long EUR/GBP from 0.6917 target 0.71+ ... stop loss added today at .6975.

Nice wellies Hils .... shame about the legs :-)

Fed minutes dodge issue of next rate cut

The latest minutes from the Fed for its September 18 policy meeting indicate that the Fed decisively cut the fed funds target rate by 50 basis points due both to concerns about instability in the financial markets and over the credit crunchs likely impact of weakening economic growth. Nonetheless, the bottom line from the minutes is that the Fed remains concerned about too weak economic growth and also the risk of high inflation. But as noted with the anti-inflation bias that ended up in the latest FOMC statement, currently the greater of these worries is inflation. But both the minutes and more recent Fed Speak leave the door wide open for the Fed to decide to either cut rates on October 31 or leave them unchanged and neither the minutes nor recent Fed Speak tip their collective hand on which is likely.

What tipped the balance and motivated the Fed to cut rates on September 18? The minutes of the FOMC meeting show that the Fed was clearly concerned about subprime credit problems leading to more adverse effects on the economy. The Fed was particularly concerned about how financial markets essentially were seizing.
"Short-term financial markets came under pressure over the intermeeting period amid heightened investor unease about exposures to subprime mortgages and to structured credit products more generally. The result was that some issuers of subprime mortgages found it difficult to roll over maturing mortgage-backed assets. As a result, asset-backed commercial paper outstanding contracted substantially. Investors sought the safety and liquidity of Treasury securities, and yields on Treasury bills dropped sharply for a period; trading conditions in the bill market were impaired at times. The Fed noted that banks became cautious and took measures to conserve their liquidity. Along with loosening lending practices at the discount window (extended lending periods), the Fed primarily cut rates to unseize the credit markets and to limit the impact of subprime lending problems and also housings decline on the rest of the economy.

Basically, the Fed saw the risks of not cutting rates greater than cutting rates. In effect, the rate cut was an insurance policy to keep the economy growing.

But how does the Fed see the economy in coming quarters? The Fed lowered its outlook for real growth in the fourth quarter slightly but still sees growth rebounding thereafter due to a strong international sector and business investment while the consumer continues to contribute positively.

The FOMC members remain cautious on inflation risks, however. The Fed acknowledged recent improvement in core inflation but is taking a longer-term focus. The Fed still sees upside risks from "rising unit labor costs," high resource utilization, and a decline in the dollar. Notably, the FOMC apparently never did believe that labor markets were as weak as indicated by the initially reported decline in August payrolls.

But net, the markets are seeing the combination of the Fed minutes position on whether there will be a rate cut as being data dependent. More recent, healthy-on-average economic data suggest that there will be no rate cut on Halloween afternoon but that rate cuts will be more spread out than believed immediately after the September 18 cut. Additionally, Fed officials this past week generally reiterated that markets should not assume a rate cut on October 31 and that the decision is still data dependent.


Ben Bernanke Speaks! Monday - Oct 15, 2007

7:00 PM ET : Federal Reserve Chairman Ben Bernanke delivers a speech on the economic outlook to the Economic Club of New York. Q&A expected .