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by Ashraf Laidi
Posted: Feb 20, 2010 5:00
Comments: 30765
Posted: Feb 20, 2010 5:00
Comments: 30765
Forum Topic:
EUR
Discuss EUR in this thread
Just a thought...
a:SNB is VERY interested in ECB HIKES (!) and will follow ECB raising rates.
b: Portuguese banks and spanisch cajas will see mounting defaults of private and commercial
mortgages if rate is hiked by even 25 bp
(in other words Spain is next candidate for huge bank bailouts?)
c: German construction so far balooned by ultra low mortgage rates will be significantly tempered
Basically the official said for SNB ECB hike is just what SNB wants but lethal for weak Ezone peripherals or its their Euro but not our problem
Turning to the UPCOMING ECB DECISION, it appears the euro rally has priced the expected 25bp rate hike to perfection. Obviously, decision to keep rates unchanged - not entirely out of the question given that the ECB's "strong vigilance" signal DID NOT have a 100% track record as a predictor of a tightening - would result in severe EUR damage. Even a 25bp hike may see some "sell-the-news" weakness. Instead, the focus will be on the 8:30ET press conference by President Trichet. Today's WSJ offers a terrific "playbook" of possibilities: The most bullish scenario would be another reference to "strong vigilance", indicating another rate hike in May. If the ECB pledges to monitor inflation "very closely", history suggests the next policy move is 2 months removed. The most dovish scenario is "monitor closely", implying at least 3 meetings before another rate hike. Beyond today's high around $1.4350, 78.6% retracement of the late 2009 swoon around $1.4440 looms as the next area of resistance.
By GG - AshrafLaidi.com Staff
Ashraf
7.45 ecb
rummed up