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Trichet Promises the Liquidity Necessary to Grease Credit Markets
Monday, 06 October 2008 23:39:49 GMT  |  Luis Gil, DailyFX.com
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European Central Bank President Jean-Claude Trichet issued a statement assuring the public that the bank will indeed provide the liquidity necessary to combat the frozen money markets.

At a Luxembourg meeting today of Euro-area finance ministers Trichet said, “we acted in a good time in sufficient degree; we’ll continue to provide monetary markets with all the liquidity they need.” But at its meeting last week, the central bank decided to hold off any definitive action. Despite bond yield forecasts of 50bp worth of rate cuts in Q1 of 2009, the ECB has yet to change its hawkish stance. The last time the 15-nation central bank cut rates was in June of 2003.

The cost of borrowing US Dollars in Europe rose from 2.50% on September 15th to 4.09% today. Libor, the benchmark interest rate on the continent, jumped sharply as mounting fears over continued bank failures promoted the idea of increased debt defaults.

EURUSD traded at 1.3521 at 19:39 EST.

10-06-08 uslibor
Source: Bloomberg

The chart above shows the 1-month Libor rate over the last six months.

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