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

We’ll be focusing 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 some of the recent rhetoric, including his statement over the weekend dismissing the possibility of Europe slipping back into recession and budget cuts plus structural reforms would help economic recovery, while bank stress tests will restore confidence.

Here are some of the points that Trichet will be discussing.  We should pay attention to them for direction of the EURO.

* ECB Rates at 1.00%, Rates are appropriate = Market reaction should be muted as this is widely expected.
* Liquidity Availability & Term = Any mentions of liquidity should be considered as a sign of weakness, the fact that banks still need them.
* Haircut or Collateral Rules = Depending on the new rule, we could see some volatility. 
* Budget Cut & Fiscal Consolidation = Depending on Trichet, but if he is optimistic, EUR should move up.
* Verbal EURO Intervention = If Trichet reiterates that EURO is good asset, then we could see EUR move up…

There may be some other comments, but if you just pay attention to these, you’ll get a clear hint where the market is headed.

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