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CUT! ECB Suprises the Market. Draghi Next Up

Last updated 11/3/2011 9:03 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

In a move that caught the capital  markets by surprise, the ECB cut its benchmark rate by 25 bp to 1.25% from 1.5% the period prior. This was an auspicious debut for new ECB President Mario Draghi who refused to stand on ceremony by preparing the  market for any possible policy move as he signaled that he will be a proactive rather than a reactive leader at the world’s second most important central bank.

Although many analysts believed that a rate cut in the EZ would be a welcome development given the region's  deteriorating economic fundamentals and current credit crisis, few were betting that Mr. Draghi would be so aggressive on his first day on the job.

The EUR/USD sold off slightly in initial knee jerk reaction to the news  but quickly recovered its footing as markets viewed the move as stimulative for the EZ economy and therefore postive for risk.  Traders will now await Mr. Draghi’s first press conference where he will address the key issues of Greece, Italian debt and the overall assessment of EZ economy going forward

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.