Euro (FXE) Falls Sharply As Trichet Disappoints Markets

The Euro (EUR) took a plunge today across the currency markets after the European Central Bank held the interest rates steady at 1.0% and the continuing unrest in Egypt also affected negatively on the currency, as investors moved to safer currencies such as the US Dollar (USD) and the Japanese Yen (JPY). The ECB rate decision was pretty much forecasted and already priced in by the markets, as the general forecast was for the rate to remain unchanged. Investors, however, were expecting much more hawkish tone from the ECB President Jean-Claude Trichet, who failed to meet those expectations. While he stated that the inflation could push higher above the ECB target 2.0% in the very near term, at the same time he reassured that there is no risk of inflation in the medium-term, therefore no pressure on the ECB to raise the interest rates sooner rather than later. Markets reacted negatively, sending the Euro lower against virtually every currency across the board. The EUR/USD fell sharply losing more than 150 pips, from 1.3760s to 1.3608 and is currently trading at 1.3620s in a quiet Asian trading session. The EUR/JPY also lost more than 100 pips, dropping from 112.50 to just above 111. The Euro also fell against its major European counterparts such as the British Pound (GBP) and the Swiss Franc (CHF). The EUR/GBP fell from 0.8520 to 0.8430, while the EUR/CHF also tumbled from 1.30 all the way to 1.2872.