EUR/USD started out at the 1.2320 zone, but was pressured lower early on as Trichet's dovish comments on consumer spending continued to filter through on the FX market sentiment. EUR/USD fell below the 1.23 mark. But the move continued as the USD felt in an improving mood, easily shrugging off some terror concerns (a suspicious truck at the NY Rockefeller center). Some reports linked the continued fall of EUR/USD to the 1.2230 zone to the dovish comments made by ECB's Quaden, but there are several reasons this interpretation doesn't really také off: first of al, it was a wide USD strengthening move also noted against GBP, AUD and NZD, which begun before Quaden's comments and secondly, if it was rate environment inspired, EUR should also have lost against sterling which it did not do. We view the Quaden comments (by the way issued in a newspaper and not intraday…) as helping ruling sentiment rather than really making a break.
Whatever the short-term inspiration, the picture is clear that the ECB is looking at the downside risks and this is not helping the case of the euro right now. These recent comments only up the importance of this Friday's IFO sentiment survey.
ČSOB Investment Research