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Hawkish Comments from ECB Sends Euro Soaring

By Kathy Lien
23 January 2006 22:38 GMT
After leaving out the word “vigilant” from his recent comments, ECB President Trichet instilled a bit of bearishness in the Euro, as the market interpreted his choice of wording to mean that the central bank may have become a bit less hawkish.  However, Liebscher’s comments today has given Euro bulls a reason to return in force, especially since there can be no misinterpretation of his view that rates are “very, very low" and current policy is "very expansive".  What is most surprising to us is the timing of his comments.  With the EUR/USD hovering around the 1.23 level, the ECB should be less hawkish in fear that the stronger Euro would hurt exports.   Yet,  they are appearing to be less worried than they may have been before.  Although, Liebscher represents the ECB as a whole, we will be waiting for confirmation by the ECB President himself to truly believe that a rate hike by the central bank will come sooner rather than later. 

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23 January 2006 22:38 GMT