Archived IMT (2008.10.02)

One day after we warned clients of prolonged euro and sterling losses despite slumping US data, both currencies extend their plunge against the US currency. Violent euro selling extends EURUSD to 1-year low below $1.3780 as ECB Chief JC Trichet says policymakers discussed a rate cut option at today's meeting despite their decision to leave rates on hold at 4.25%. An important remark by Trichet indicating that the central bank regained control in shaping inflationary expectations, which may be interpreted as a victory on the inflation front, allowing the central bank to move forward in dealing with growth risks. Trichet left the door open for coordinated cuts with other CBs by indicating although the ECB acts only on price stability, it remains in an intimate coordination with other central banks.