German bank rumours spark USD/EUR volatility
The purported troubles of a German bank sparked large swings in EUR/USD price action during the overnight sessions. The rumour that German bank Duesseldorfer Hypothekenbank (that's worth 274 at Scrabble) was facing liquidity issues saw the pair fall over 75 points to 1.5833. The subsequent denials from the property lender sparked a Euro rally that erased the earlier losses and sent the pair above 1.5950 making a run at 1.60.
When reports surfaced that the German BdB banking association had taken control of lender Duesseldorfer Hypothekenbank, traders feared the worse on the heels of ECB President’s Trichet’s recent comments warning that the financial –market crisis was far from over as long as banks were reluctant to lend. The banking association has temporarily transferred the lender to one of its guaranteed funds; until Germany’s second largest housing lender can be sold. The move will allow the financial institution to get through the problems it faces brought on by the current credit crisis.
Traders have started to focus on the recent comments from Trichet and other ECB members reaffirming their hawkish stance. Council Member Nicholas Garganas stated today that the central bank won’t reduce rates if inflation remains high, and the course of future interest rates will depend on inflation risks. Expectations are growing that the interest rate differential between Europe and the U.S. will continue to grow, with the Fed expected to cut rates by at least 25 points at its upcoming meeting on April 30th.
When reports surfaced that the German BdB banking association had taken control of lender Duesseldorfer Hypothekenbank, traders feared the worse on the heels of ECB President’s Trichet’s recent comments warning that the financial –market crisis was far from over as long as banks were reluctant to lend. The banking association has temporarily transferred the lender to one of its guaranteed funds; until Germany’s second largest housing lender can be sold. The move will allow the financial institution to get through the problems it faces brought on by the current credit crisis.
Traders have started to focus on the recent comments from Trichet and other ECB members reaffirming their hawkish stance. Council Member Nicholas Garganas stated today that the central bank won’t reduce rates if inflation remains high, and the course of future interest rates will depend on inflation risks. Expectations are growing that the interest rate differential between Europe and the U.S. will continue to grow, with the Fed expected to cut rates by at least 25 points at its upcoming meeting on April 30th.
