Profit Mongers @ 5:33 AM, Thursday December 08 2011
0745 ECB Interest Rate Decision - (1.0% expected, 1.25% prior, 1.25% to 0.75% range)
Out of the 58 analyst's polled by Bloomberg, 2 expect the ECB to hold rates steady at 1.25%,
also 2 expect a full half percent cut, or 50 basis points. The remaining 54 analysts all
expect the ECB to cut a quarter percent or 25 basis points. So although if they do cut
25 basis points there could be a bit of a sell-off in the EURUSD as the confirmation of these
expectations becomes reality, it is a bit risky since so many of the analysts expect it.
Therefore really the triggers should be for a buy if they hold steady and a sell if they
cut more than expected to 0.75%. Either is a possibility today, although the situation
does seem pretty dire as day after the day we muddle our way thru this crisis merely buying
time so that these big decision can be made. Even if and when these political decision are
made which will allow the ECB to become the lender of last resort and the Eurozone stability
fund is grown big enough to support these debt burdened countries, this might not even sort
out the problems. However the effects of a Eurozone breakup and 1 or more Eurozone countries
defaulting is very serious indeed and could threaten the entire global financial system.
About 45 minutes after the Rate announcement the ECB will hold a Press Conference which will
shed more light on their decisions and give some insight on the ECB's perspective on all the
political developments.
If they hold rates steady at 1.25%, EURUSD should rally 30-60 pips
If they cut 50 basis points to 0.75%, EURUSD should sell off 50-80 pips
If they cut 25 basis points to 1.0% as expected, the EURUSD could see some downward pressure,
but it is a risky trade.
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