The Euro declined against most of its major counterparts today following deeply negative Current Account data and news that the European Central Bank would be lending a record €442 billion to banks for 12 months, and this was just the first of three auctions. The ECB’s move is somewhat contradictory to comments from ECB council member Axel Weber, who said that the central bank had “used the room for rate reductions that was created by waning inflation risks and a dramatic worsening of the economic situation.” While the auctions are certainly not the same as lowering interest rates, the amount allotted today will ultimately have much the same effects as improved liquidity should lead money market rates to decline and should provide the necessary credit for struggling businesses and consumers.
Meanwhile, the euro surged against the Swiss franc today in what looks like intervention by the Swiss National Bank, though they would neither confirm nor deny the speculation. The SNB has said multiple times in the past that they would do so, as an appreciation of the Swiss franc against the euro threatens to increase deflation risks since the Euro-zone is Switzerland’s biggest trading partner. That said, EUR/CHF made an important break above a falling trendline connecting the July, August, and December 2008 highs near 1.5200 and also pushed out of its recent trading range of 1.5000-1.5235, suggesting that this could be a bit of a change in trend for the pair.
[B]Related Article: Euro Weekly Trading Forecast[/B]