The euro slipped for yet another day versus the US dollar and Japanese yen, as a combination of risk aversion and speculation of a rate cut by the European Central Bank (ECB) on Thursday morning weighs on the currency. According to Credit Suisse overnight index swaps and a Bloomberg News poll of economists, the ECB is likely to cut interest rates by 50 basis points to match the 2005 record low of 2.00 percent. This easily leaves the 7:45 ET announcement as one of the most important pieces of event risk this week, but traders will also have to look out for comments by ECB President Jean-Claude Trichet during his post-meeting press conference at 8:30 ET. Mr. Trichet is one of the most opinionated central bank chiefs around, and suggestions that the ECB will continue to cut rates have the potential to lead the euro far lower. On the other hand, a more probable scenario is if the ECB goes the route of the BOE and signals that they may leave rates unchanged during their next meeting, the currency could actually rally.
Related Articles: Top Forex Trades for 2009, Euro Traders Speculating On 50bps ECB Cut And Beyond, Euro / Dollar Move Back to 1.35 Expected
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