ECB raising interest rates?

[Pipcrawler]

"Experts" are forecasting that the ECB will raise interest rates from 3.25% to 3.50% on Thursday. What does everyone think about the forecast? How are you going to play this potentially volatile event?? Please share your ideas

[topchess]

I am not a fundamental guru, but you know I like a few major events during the month. Especially the ECB rate decision, every month I must follow the live coverage.

I think that ECB is going to raise rates to 3.50% on Thursday, in line with "strong vigilance" and Trichet signals last meeting. I also think that is very much priced in the market.

Market focus will be on the statement or any hint regarding next year rate outlook. I do not think that Trichet will give any ideas into next year rate outlook or any signal to further tightening in policy.

There is a chance that he will talk down EURJPY or EUR strength at certain levels in FX. (in a statement like. disorderly FX moves are undesirable.)

All in all, I think it will be slightly bearish for the Euro versus US dollar and Sterling pound. especially with markets will have no idea on where interest rates could go beyond this year.

Unless he signals further tightening, and this is far from possible in my view.

I will not attempt to sell euro/dollar ahead of the decision though, it seems that USD selling course has not ended, for own USD reasons. Might try EURGBP or EURJPY short side afterall

[PipDiddy]

That's an excellent analysis topchess! Bravo!

I agree with you that Jean Claude "Van Dame" Trichet will most likely leave the market guessing - kinda like trying to figure out what's inside a wrapped gift. He's probably doing this on purpose because it's Christmas time. Hohohoho!

Of course, I'm sure some Europeans would love for him to hint of more future rate hikes since it would cause the euro to appreciate further. This would mean a bigger discount when shopping in the US. You gotta love touching down in NY and everything is instantly 33% off!