Despite tough rhetoric on results of previous meeting of Governing Council European Central Bank kept the rates at the previous level - 4%
Acting at press-conference Trichet said that monetary policy in Eurozone is still soft and balance of risks for CPI is shifted towards rise. According to Trichet volume of liquidity is still excess and money supply and crediting rise at fast rates. At the same time ECB head noted that financial situation remains "favorable".
Despite inflation in Eurozone since the beginning of a year is kept at a level which is considered by ECB as acceptable, ECB considers that inflationary pressure can strengthen as unemployment reduces and rise of consumer expenses quickens. "Governing Council will watch closely the situation to guarantee that in the medium term prospect risks for price stability will not come true to life and that medium and long term inflationary expectations in Eurozone will be at levels corresponding to price stability" - Trichet said.
Using of "watch closely" phrase can indicate that ECB will most likely raise interest rate this year but it will hardly happen in August
Increase in Bank of England rate was expected. It is already the fifth in row rise in rate. So the BE rate now is equal to 5.25% and by 0.25% above FRS rate.
Today it is expected issue of important employment report of the US Labor Department in April, 2007.
Let's remind that the previous report showed positive on employment indicators:
Rise in nonfarm payrolls increased up to 157 000 and Unemployment rate remained at 4.5%.
Today there is an opportunity to open intraday positions on results of issue of news in such case:
shorts on euro and pound of sterling if nonfarm payrolls is better than previous values and Unemployment rate is at the same level or reduces. Longs on euro and pound of sterling if nonfarm payrolls are worse than the previous values and forecasts and Unemployment rate is at the same level or increases.
If data of nonfarm payrolls are in a range above expectations but worse than the previous data or Unemployment rate is in contradiction with nonfarm payrolls data it is recommended to be off market.
Open according to the same tactics, two orders at the same time, one on short profit at 40 points, another is placed in break-even at minimal profit.
