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Surprise! ECB Cuts by 25bp

Last updated 4/2/2009 8:14 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

As expected the ECB lowered its overnight rate by 25bp to 1.25% in response to worsening economic conditions in the Eurozone. With the market anticipating the move the EUR/USD did not have much of a reaction as traders awaited the post announcement press conference with Jean Claude Trichet. Three key questions will occupy traders’ minds:

1.    Now that rates have reached 1.25% (assuming 25bp goes into effect) will ECB begin to implement “unconventional measures” ?

2.    Is 1% the floor for ECB rates?

3.    3. How will the ECB deal with credit crisis in Eastern Europe?

The most critical of which will be the position of the ECB on quantitative easing. If Mr. Trichet hints that the central bank is considering such a move the EUR/USD is likely to weaken on the news. We will be back during the press conference with more analysis.

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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.