European Central Bank Cuts by 50 bps to Record Low, All Eyes on Trichet

The European Central Bank lowered the benchmark interest rate by 50bp to 1.50% as expected, and traders will be focused on President’s Trichet’s press conference starting at 13:30 GMT as they look for further clues on what the central bank intends to do to stimulate the ailing economy.


[U][B]Fundamental Headlines[/B][/U]

[I]• GM Warns of Possible Bankruptcy[/I] – Wall Street Journal
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[I]• China targets 8% growth despite crisis[/I] – Financial Times
[I]• UBS Official Says Bank Can’t Turn Over More Names in U.S. Suit[/I] – Bloomberg
[I]• JPMorgan, Wells Fargo, Bank America Face Ratings Downgrades, Moody’s Says[/I] – Bloomberg

[B]EURUSD[/B] – The European Central Bank lowered the benchmark interest rate by 50bp to 1.50% as expected, and traders will be focused on President’s Trichet’s press conference starting at 13:30 GMT as they look for further clues on what the central bank intends to do to stimulate the ailing economy. On the economic front, retail spending in German unexpectedly fell 0.6% in January after rising 0.5% in the previous month, which lowered the annualized figure by 1.3%. Meanwhile, the preliminary GDP reading for the Euro-Zone confirmed that the economy contracted 1.5% during the 4Q, while the annual rate of growth was revised lower to -1.3% from the initial reading of -1.2%. The breakdown of the report showed the investment-spending fell 2.7%, while household consumption contracted 0.9% from the third quarter, which was the largest decline since the series began in 1995. Discuss the topic and your trade ideas in the EUR/USD Forum.

[B]GBPUSD[/B] – The Bank of England lowered the benchmark interest rate by 50bp to 0.50% in an effort to maintain the 2.0% target for inflation and said it would spend GBP 75B in the purchases of Gilts and corporate bonds over the next three month in order to better-manage monetary policy. Meanwhile, the HBOS home price index dropped 2.3% during February after a rising 2.0% in the previous month, while the annualized reading showed that home values slumped 17.7% during the three-months to February. Despite the up-tick in January, tightening credit conditions paired with increased turmoil in the banking sector will continue to weigh on the housing market, and households are likely to face increased heads winds throughout the year as the unemployment rate for the Europe’s second largest economy at its highest level over a decade. Discuss the topic and your trade ideas in the GBP/USD Forum.