ECB Trichet Press Conference 04/08/10

8:30am NY Time ECB Chairman Trichet Press Conference
ACTION: N/A

We’ll be concentrating on the ECB (European Central Bank) Chairman Jean-Claude Trichet press conference today as he releases an official statement from ECB regarding the official Interest Decision at 7:45am today, and after the prepared speech, he will have a brief Q&A Session… Here is an overview of the situation

“Trichet usually delivers an official statement along with a Q&A session 45 minutes after the official rate decision at 8:30am.  This press conference is usually very volatile and the market is always looking for clues from Trichet’s tone over future monetary policy directions.  If Trichet is hawkish over the future of EURO, namely talking about exit strategey and possibility of rate hikes, then we will see EURO gaining across the board; however, if  Trichet is dovish, focused on how slow the recovery might be and also on the issues over the imbalances of recovery within the members of EURO Zone, we’ll probably see EURO trade lower against other currencies…  Furthermore, Trichet will never tell you what you want to hear… therefore you need to listen between the lines and keep an eye on the market for confirmation.

Fair Warning: If you have never traded this release, it is better to stay out of the market.  Wait until around 9:30am~10:00am NY Equity open, then follow the trend.  If Trichet is hawkish or being optimistic, then EUR/USD will gain throughout the session and may even carry over to Friday.  Therefore there are plenty of opportunities to trade after the market has already established itself.

This Press Conference is usually done in 2 parts, the first part is a written statement which various newswire services will release headlines immediately at 8:30am, then Trichet will read through the statement; 2nd part of the press conference is a Question and Answer session where Trichet will take questions live from onsite media members.  This part is highly unpredictable as Trichet may hint the market and drive prices intentionally.  As I once heard from someone who knows Trichet personally, that there is never a slip-of-tongue with Trichet, he does everything intentionally.

However, Trichet is pretty good in maintaining a neutral stance, but sometimes market may read too much into his statements and move excessively… so once again, if you have not traded this release before, best to stay out.”

Trichet is likely to repeat recent rhetoric as the situation remains similar to that of  last rate decision.  However, Trichet may address Greece’s situation which will cause some volatility in the Euro.  As a matter of fact, the number one concern for Euro traders today is probably the Greece situation.  With Greece being once again on the headlines, default credit swap traders are just daring EU to take some action.  All of these recent verbal interventions trying to boost confidence in Greece have not worked.  Traders are calling the bluff… and if Greece were to fail, an economy of merely 2.5% of the entire EU GDP, what would happen when larger economies, whom are in the very same situation as Greece (Italy 17% GDP, Spain 12% GDP), were to fail since EU is unable or unwilling to help Greece?

That’s precisely the reason why we are seeing EUR/USD drop this week, and it may continue to drop to the 1.3000 or more unless a sound solution is provided with Greece.

Here’s some recent comments made by ECB officials to help you guess what Trichet will be talking about today.

Mar. 31 -  ECB‘s Trichet: Stresses the fragility of the recovery and the importance of confidence as key ingredient in the recovery
Mar. 30 – (GR) ECB‘s Makuch: Reiterates that IMF Greece aid is a last resort
Mar. 29 -  (GR) ECB‘s Nowotny: Collateral changes are not designed to help any single member of the Euro Zone – Collateral changes should bring down spreads on Greek debt.  – Collateral changes would reduce dependence on sovereign ratings. - Plan for cooperating with the IMF on Greece is “adequate,” notes that cooperating with IMF must not impact ECB independence
Mar. 28 -  (EU) ECB‘s Weber: Reiterates no inflation risks evident so interest rates are appropriate; Economic outlook uncertain, pace of recovery differs among countries – Unwinding of special programs not indicative of tightening bias.
Apr. 6 -  (EU) ECB‘s Kranjec: Sees higher borrowing costs for euro zone banks

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