European Central Bank holds rate steady, Producer Prices fall. Euro tumbles in forex trading. | CountingPips Forex Blog

October 2, 2008 - Forex Economic News

European Central Bank holds rate steady, Producer Prices fall. Euro tumbles in forex trading.

The European Central Bank announced today that it decided to keep its main interest rate unchanged at 4.25 percent. The rate announcement was in line with the forecasted market expectations and is the second straight month the ECB has left the rate unchanged. The ECB had last changed its interest rate in July when the rate was raised by 25 basis points to ECB holds interest rate, euro falls in forex trade. reach the highest level in seven years.

Jean-Claude Trichet, the President of the ECB, cited in his press statement today that the "recent intensification of the financial market turmoil" has created an "extraordinarily high level of uncertainty" in the economic outlook. On the European economy and insight behind the rate hold, Trichet said, "The most recent data clearly confirm that economic activity in the euro area is weakening, with contracting domestic demand and tighter financing conditions. At the same time, annual inflation rates are likely to remain well above levels consistent with price stability for some time. With the weakening of demand, upside risks to price stability have diminished somewhat, but they have not disappeared."

Trichet, in his press conference today, stated that the bank weighed the possibility of a rate cut before deciding to hold the rate unchanged. Trichet's comments further fuels speculation of an imminent rate cut by the end of 2008 as inflation lessens with falling oils prices and as eurozone economic activity slows as evidenced by the 0.2 percent GDP contraction in the eurozone for the 2nd quarter. The ECB's next rate decision is scheduled for November. You can read the full Trichet statement here.

Producer Prices decline in August.

Producer Prices in the eurozone fell in August from July according to a report released from EuroStat today. Producer prices decreased by 0.5 percent in the month of August following an increase of a revised 1.3 percent in July. On an annual basis, producer price inflation registered a 8.5 percent increase over August 2007 following a revised 9.2 percent annual increase in July. Market forecasts were on the mark expecting monthly producer prices to decline by 0.5 percent and the annual rate of increase to register 8.5 percent. Producer prices, excluding energy prices, rose by 0.2 percent for the month of August. Contributing to the decreased producer prices was a decline of 2.5 percent in energy sector prices.

Euro falls in Forex Market trading.

The Euro fell today to it's lowest exchange rate in over a year verses the U.S. dollar after the rate announcement and Trichet's press conference amid speculation of future rate cuts. The euro opened trading today at approximately 1.4006 dollars per euro and has fallen to trading at 1.3828 in the afternoon of the U.S. trading session. The euro reached a low of 1.3749 verses the dollar in today's trading which marks the lowest EUR/USD exchange rate since September 7, 2007. The euro also fell against some of the other major currencies today including the yen, franc and pound sterling. The EUR/GBP has fallen to 0.7831 in trading today while the euro has fallen verses the Japanese yen for the fifth straight day. The EUR/JPY has declined from approximately 155.65 to 145.36 in that five day time frame.

EUR/USD Chart - The European euro falling verses the US dollar for the 4th day in a row(Daily Chart).

Today's Forex Chart

tags: ecb, interest rates, ppi, euro, forex trade

Blog Index