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Euro Dollar – 5th March 2009

The fundamental news and economic news today is dominated by interest rate decisions, both in the UK and Europe, with the first release coming from the UK at noon. Both the Bank of England and the European Central Bank are expected to cut by 0.5%, and for Europe this will lower the current rate from 2% to 1.5%. The announcement is due at 12.45 today, with a press conference 45 minutes later, which covers the rate decision. The conference itself is around an hour long, and is split into two parts. The first is a pre-prepared statement which explains the decision, and this is then followed by a question and answer session afterwards. As the markets have already factored in the rate cut, it it this session that is likely to provide the volatility, as the markets look for clues to any unscripted answers, which can often provide a signal of future trends in the ECB policy.What will be interesting today, is not so much the rate cut itself, but whether there is any talk of increasing the money supply to the market, often referred to as quantitative easing – printing more money to you and me! This is the approach the BOE is likely to take when it announces its decision shortly, in a vain attempt to stem the deflationary pressures and to introduce an element of inflation to prevent further falls in prices and demand. The problem is, of course, how much is enough? We are now in a world where the people in control have no idea of the likely effect of such moves, and given the track record of ineptitude to date, it hardly inspires one with confidence. The saviour of the world will be back soon, so we can all rest easy in our beds! Whether the ECB follows the BOE and starts the printing presses rolling, we will have to wait and see. If it does, it will no doubt remember the inflation caused as a result in the early 20’s in Germany, with employees being paid three times a day, and wheelbarrows required for the daily shop.All of the above, and more, is probably enough to introduce some volatility into the euro dollar, and we may just see the consolidation period of the last few weeks finally coming to an end.

Later in the day in the US, we have the Unemployment Claims which is the number of individuals who filed for unemployment insurance for the first time during the past week. The forecast is for a slight fall from last week by 20,000 to 647,000, and if the actual is better than forecast then this will be positive news for the US dollar. All the economic news is covered for you in the economic calendar, along with the latest currency news on the TV video channel, with the latest news on the live news feed. So hold on to your seats – the next few hours could be a bumpy ride!