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Euro To Dollar – 5th February 2009

Yes, it’s interest rate decision day again, both in Europe and in the UK with the first release due from the Bank of England, followed by the ECB 45 minutes later. The UK decision is widely expected to be a rate cut of 50 bps, to 1%, whilst the ECB is expected to keep rates on hold at 2.0%. The problem for us as traders is to know in advance whether the market has factored in the rate announcement, which is often the case, and in many ways the ECB Press Conference which follows 45 minutes afterwards, tends to carry more weight in the market, as the comments offer a view of the longer term thoughts from the members of the board. The press conference is generally an hour or so long and is split into two sessions. The first session is a pre-prepared statement which is read, and the second half is a question and answer session for the assembled press. The second is generally more interesting than the first as the questions asked often lead to an unscripted reply, which is often more revealing than the rate announcement itself, or the prepared statement, so markets can move violently as this session unfolds. If you want to follow this session it does appear on the ECB site, although with a small delay from the real time, so do expect price movements to be ahead of the news on screen.

In the afternoon we have the Unemployment Claims which measures the number of people who filed for unemployment insurance for the first time during the past week. If the actual comes in less than forecast then this is generally considered good for the home currency, in this case the US dollar. Although it is generally considered to be a lagging indicator, it is nevertheless considered important by traders, investors and the markets, and will move the market when released later. The forecast is 585,000 against a previous of 588,000.