Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious Outperformance
Find Stocks Now

FOREX-Euro slides across the board after Trichet comments

Published 06/09/2011, 10:06 AM
Updated 06/09/2011, 10:16 AM

* ECB holds rates, July rate now widely expected

* Hedge funds heavily short dollars vs euro pre-Trichet

(Recasts, updates prices, adds Trichet comment, fresh analyst quote, changes byline, dateline, previous LONDON)

By Gertrude Chavez-Dreyfuss

NEW YORK, June 9 (Reuters) - The euro surrendered gains against the dollar on Thursday after European Central Bank President Jean-Claude Trichet signaled a rate hike next month that already had been widely expected, leaving little room for further upside in the single currency.

Traders said asset managers were heavily short the U.S. dollar against the euro ahead of Trichet's statement and were poised to sell the single euro zone currency on any rally.

The euro did rise after Trichet said "vigilance" was warranted, but reversed gains in a sharp move that saw investors whip through stops below $1.46000 $1.45500, and $1.45000.

Trichet, in his statement after the ECB left rates unchanged at 1.25 percent, used the words "strong vigilance". For the past few years, investors have come to view the words "strong vigilance" as Trichet's way of signalling an impending rate increase the following month.

For Trichet's remarks, click on [ID:nFAT007213].

Negative headlines on Greece and wider regional debt concerns have also raised doubts over the prospects for ongoing ECB policy tightening and euro strength.

"The July rate hike has been fully discounted and the euro is suffering from a 'sell the fact' price action," said Richard Franulovich, senior currency strategist, at Westpac Securities in New York.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

The last eight times Trichet used those key words, the euro appreciated in the 72 hours that followed, analysts said.

The euro hit a session low at $1.44777 on trading platform EBS

Against the yen, the euro was down 0.4 percent at 116.040

With Trichet out of the way, the focus could squarely come back to the Greek debt crisis. The continued possibility of Greek debt restructuring was raised again on Wednesday in a letter from German finance minister Wolfgang Schaeuble to the leadership of the ECB, International Monetary Fund and his euro zone peers.

"We are unlikely to see the euro break $1.50 again until the situation with Greece is sorted out," said Kathleen Brooks, currency strategist at FOREX.com in London.

Greek first quarter GDP data released on Thursday showed a 5.5 percent year-on-year slump. [ID:nATH006146]

Against sterling, the euro

(Editing by Chizu Nomiyama)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.