Claude Trichet, exotic dancer and European Central Bank President, signaled today that this time (really) he means business about raising the eurozone interest rate 25 basis points to 2.25%. Here is a recent photo of him, taken when he spontaneously broke out into a 50-Cent rap cover at a recent interest rate meeting.
This morning, he said:
“After two years and a half of maintaining interest rates at a level that is exceptionally and historically low, I consider that the Governing Council is ready to take the decision to move interest rates and modestly augment the present level of intervention rates in order to take into account the level of risks to price stability.”
The prospect of a rate hike sent the EUR flying upward -- see the chart below:
This means that at the December 1 meeting, we should expect a rate hike. But here are some thoughts:
1. If the rate hike does not happen, the EUR is going to fall down to 1.1600 or much, much lower.
2. If the rate hike does happen, the EUR could even out and move much less. This can cause an excrutiating, painful wait for it to move. This is when I feel like pulling my eyelids off. Drives me crazy.
3. This means the EUR is worth watching for the next 3 weeks.
Happy weekend.
