ECB nervous over Euro appreciation

Jean Claude Trichet, president of the European Central Bank, is know for his terse, deliberately vague commentary. This week, he veered slightly away from that modus operandi by speaking out against Euro “volatility” in forex markets. In other words, he has not been delighted by the Euro’s rapid appreciation against the USD. While Trichet indicated that such an appreciation is bad for EU growth, he did not encourage EU governments to attempt to stabilize the currency. Thus, it is not clear how the markets will react to such comments, although if it appears likely that the ECB will alter its monetary policy as a result of the Euro volatility, the markets will certainly take notice. The International Herald Tribune reports:

ECB President Jean Claude Trichet said that while globalization had led to lower import costs for manufactured goods, it had boosted demand and increased oil prices.

Read More: ECB president says volatility in currency markets not good for long-term growth

US Dollar Slips To Record Low Against Euro

Greenback also hit by fears of more loss disclosures by financial sector firms.
source: London

The greenback hit record low against the euro yesterday as fears grew that more united states financial firms will be hit by credit market turmoil, reinforcing the expectations of further Federal Reserve interest rates cuts. Such worries came to the fore again after ratings agency Standard & Poor's said on the Thursday that a collateralise debt obligation(CDO) managed by state street global advisers may have started selling assets. CDOs are products packaged from risky mortgages in the US.
A downbeat economic forecast from Fed chairman Ben Bernanke on Thursday cemented market views that the Fed will cut rates more, further eroding the greenback appeal. The euro rose as high as US$1.4738, before trimming gains to reach US$1.4686 by 0807GMT. It is now up more than 11 percent against the euro since the start of the year.