Despite a rally early in the morning toward 1.4250, the euro ended the day almost unchanged against the US dollar. On Friday we saw that Euro-zone CPI data highlighted the contrast in interest rates between central banks like the Reserve Bank of Australian and the European Central Bank, as Eurostat estimates showed that CPI fell to an annualized pace of 0.0 percent, indicating a stagnation in price growth during the month of May. The drop from 0.6 percent was sharper than expected, and left inflation well below the ECB’s 2 percent target. Nevertheless, according to a Bloomberg News poll of economists, the ECB will leave rates unchanged at 1.00 percent next Thursday. Where the currency ends the day, though, may have more to do with what ECB President Jean-Claude Trichet says during his post-meeting press conference at 08:30 ET. Indeed, in May the ECB announced that they would buy 60 billion euros worth of covered bonds issued in the Euro-zone, but that details wouldn’t be released until after this upcoming meeting. As a result, much attention will be paid to which bonds will be bought and how the ECB plans on going about buying them, as direct buying from issuers would effectively supply them with direct funding, whereas the purchase of existing covered bonds would support prices and drive down yields.
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