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Forex Analysis (Thu, August 5 2010, 8:30am NY Time EDT) - EU ECB Trichet Statement...

Discussion in 'Current Forex Trading Signals' started by Henry Liu, Aug 4, 2010.

  1. Henry Liu

    Henry Liu Former FPA Special Consultant

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    8:30am NY Time ECB Chairman Trichet Press Conference

    We’ll be focusing on the ECB (European Central Bank) Chairman Jean-Claude Trichet press conference today as he releases an official statement from ECB regarding the official Interest Decision at 7:45am today, and after the prepared speech, he will have a brief Q&A Session… Here is an overview of the situation

    Trichet's Press Conference Overview
    “Trichet usually delivers an official statement along with a Q&A session 45 minutes after the official rate decision at 8:30am. This press conference is usually very volatile and the market is always looking for clues from Trichet’s tone over future monetary policy directions. If Trichet is hawkish over the future of EURO, namely talking about exit strategey and possibility of rate hikes, then we will see EURO gaining across the board; however, if Trichet is dovish, focused on how slow the recovery might be and also on the issues over the imbalances of recovery within the members of EURO Zone, we’ll probably see EURO trade lower against other currencies… Furthermore, Trichet will never tell you what you want to hear… you need to listen between the lines and keep an eye on the market for confirmation.

    Fair Warning: If you have never traded this release, it is better to stay out of the market. Wait until around 9:30am~10:00am NY Equity open, then follow the trend. If Trichet is hawkish or being optimistic, then EUR/USD will gain throughout the session and may even carry over to Friday. Therefore there are plenty of opportunities to trade after the market has already established itself.

    This Press Conference is done in 2 parts, the first part is a written statement which various newswire services will release headlines immediately at 8:30am, then Trichet will read through the statement; the second part of the press conference is a Question and Answer session where Trichet takes questions live from onsite media members. This part is highly unpredictable as Trichet may hint the market and drive prices intentionally. As I once heard from someone who knows Trichet personally, that there is never a slip-of-tongue with Trichet, he does everything intentionally.

    However, Trichet is pretty good in maintaining a neutral stance, but sometimes market may read too much into his statements and move excessively… so once again, if you have not traded this release before, best to stay out.”

    Market Expectation
    Trichet is likely to repeat some of the recent rhetoric, including the cautious outlook for the economy such as "negative effects from Sovereign Debt Crisis appears to have worsened bank's ability to obtain funding" and positive views of the results of recent Bank Stress Test, and in his own words "very important transparency exercise". Market is going to want dig deeper into his statements and in my opinion we should focus on the following:

    ECB Rates at 1.00%, Rates are appropriate = Market reaction should be muted as this is widely expected. However, if he mentions any future monetary policy direction, expect some heavy volatility.

    Liquidity Availability & Term ECB has effectively ended the emergency bond purchases in response to the Greek debt crisis and according to an article on Bloomberg, last week's bond purchase dropped down to 81 million Euros compared to 16.5 Billion during the first week. This could be positive for the EUR if Trichet focuses on this and possibly announcing resuming the exit strategy that ECB started before the sovereign debt crisis but had to pause it abruptly.

    On the other hand, although resuming exit strategy may send out a message that ECB is confident over European economic recovery, but the general market may be worried about imbalances in Greece, Italy, Spain, Portugal, just to name a few... Market reaction could be difficult predict, we may even see the broader market go against EUR... it will depend on whether or not Trichet provides adequate enough reason to convince the market.

    Budget Cut & Fiscal Consolidation = On July 22 Trichet called for immediate raise of taxes and spending cuts. Trichet went on saying that he believed that budget cuts have limited impact on growth. Also said " "fiscal deterioration we are experiencing is unprecedented in magnitude and geographical scope. By the end of this year, government debt in the euro area will have grown by more than 20 percentage points over a period of only four years, from 2007-2011."

    If Trichet were to focus on this point, we could see some negative reaction in the market against EUR.

    There may be some other comments, but if you just pay attention to these, you’ll get a clear hint where the market is headed. Most analysts agree that Trichet will keep his statement towards neutral stance... even after the impressive recovery we saw in the EUR/USD during the past few weeks. ECB is likely to wait until September before announcing any drastic change in the monetary policy.

    I hope this analysis helps you to understand this event a little better.


    Thanks,


    [​IMG]
     
  2. lnoboa2001

    lnoboa2001 Recruit

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    Trichet press conference

    Hello Henry, I like the way you prapared and recommended us how to react to the following press conference. I just wonder if there is a way to see the conference live by internet.

    Thanks :)
     
  3. duck

    duck Private, 1st Class

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    Thanks, Henry, for the detailed perspective. Looking forward to Friday's NFP!
     
  4. supahfly

    supahfly Recruit

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    Thanks again Henry,

    Always nice to see your recommendations when I logon to my computer.

    S.
     
  5. Ilodibe Odinaka

    Ilodibe Odinaka Recruit

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    thanks henry for your wonderful analysis,you are wonderful.keep it up.
     
  6. ugolion

    ugolion Recruit

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    thanks henry; i love the wonderful work you are doing.please it's good to trade news with pending order? remain bless.:)
     
  7. Mohd Amirul Nazri

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    Thanks henry...i salute you..:)
     
  8. Chrisstoff

    Chrisstoff Recruit

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    Very professional analysis, Henry. Thank you for sharing it.

    Could you please tell us an address where from the Trichet speach will be broadcasted?

    Regards,

    Chrisstoff
     
  9. made4life

    made4life Private

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    Thanks Henry for your detailed analysis. You make news trading interesting. I appreciate your contribution. God bless you.
     
  10. kamuta

    kamuta MQL45 Representative

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    You can see this conference on Bloomberg TV

    I always see Trichet live on Bloomberg TV - it's big comedy every time... :)
     

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