The ECB spoiled the USD recovery efforts

Nothing much came out of the ECB keeping interest rates unchanged. It was widely expected after all.

However, great insight was given in the posterior Trichet conference. Trichet took such an aggressive stance on inflation that the EUR/USD would quickly return to its usual levels. The market learned that the ECB is leaning more on the side of raising interest rates than lowering them. In fact, today's interest rate decision was not unanimous as some members argued for an interest rate hike!

Very bullish news for the Euro.

Some statements from Trichet Conferece

The ECB decided to keep interest rates unchanged at 4%. This was mostly expected, however Trichet took a very aggressive stance on inflation.

Below are some statements coming from this conference...

-Recent data confirmed upside risk to inflation pressure

-Economic fundamentals remain sound

-Will continue to pay close attention to developments in financial markets

Q3 07 GDP at .7% GDP, inline: domestic demand remained main force in euro zone , sustained nature of economic expansion, robust employment growth, annual gdp growth expected 2.4 to 2.8% in 2007; 1.5 – 2.5% in 2008; 1.6 – 2.6% in 2009.

-sustained GDP growth, US weakness will be offset by emerging economies

-annual inflation rate increased strongly

-energy prices having strong upward impact on inflation

-inflation rate expected to remain well above 2% in coming months and expected to moderate in 2008

Dollar is Staging a Recovery

The Dollar is staging a recovery in a day when the Bank of England lowers its interest rate to 5.50%. This is a surprise move by the bank as most analysts were still expecting the money price to remain unchanged. Some, however, were starting to consider a cut.

The GBP/USD has lowered to 2.02 while the EUR/USD is testing significant trendline at 1.4520.

With minutes to go for the European Central Bank to makes its interest rate decision, another surprise could provoke some greater volatility to the forex market. It is expected to remain unchanged.