ECB’s President Trichet Speaking in Frankfurt

Says

• Adjustment of current policy was warranted
• Identified upside risks to inflation
• Rate move warranted due to upside risks
• Liquidity remains ample
• Must avoid broad based inflation pressures
• Anchoring of inflation expectations important for growth
• Expectations anchoring is prerequisite for policy
• Stance of monetary policy remains accommodate
• Underlying momentum of economy remains positive
• Economic uncertainty remains ‘elevated’
• Non-Standard measures are ‘temporary’
• Important to avoid second round effects
• Inflation expectations must remain firmly anchored
• Risks to inflation’s outlook remain on upside
• Risks to inflation outlook relate to higher energy costs
• Emerging market strong growth may fuel commodities
• Indirect tax effect on CPI may be greater
• Underlying monetary expansion still moderate
• Underlying pace of monetary expansion is picking up
• Important for banks to expand credit to economy

Trichet says rates are just right. Speaks in Davos

Jean Claude Trichet of the ECB is on the newswires saying that ECB rates are appropriate. He further comments that the ECB has delivered price stability and inflation expecations are anchored. He will do all that is necessary to fight inflation.

Recent data points to a gradual recovery and the banks have improved their balance sheets. He encourages banks to seek their own funds from the market and rely less on the ECB for funding.

He says that EFSF purchase of bonds could be used to recapitalize banks.

Cutting bailout interest rates is a government matter and EU Debt restructuring not in the plan.

Large number of banks have improved their balance sheet.

Since the 3rd quarter of 2009 been positively surprised on the economy. PMI confirm recovery.

ECB’s President Trichet On the Wires

Says:

• Global growth better than expected
• Emerging economies are driving global growth
• Inflation threats in emerging, not advanced economies
• Must analyse reasons for food price increases
• Central banks must anchor price expectations
• Declines to comment on exchange rates
• Global economy meeting didn’t discuss Portugal
• Fiscal policy soundness important

Bobbys Corner-Open Market-Dec.2.2010

Good Morning:

Risk appetite  returned to the FX world and EUR/USD moved up to  a high of 1.3216 in overnight trading.  The Euro moved higher after a better than expected Spanish debt auction.  The 3 year Spanish bonds came in at a yield of 3.71% versus the 4 % that was originally feared.
As expected the ECB left interest rates unchanged-but the markets are looking for ECB President Trichet’s comments this morning.

All eyes will be on Friday’s US employment data-set for 8:30 AM tomorrow.

World equity markets rose after yesterday’s 250 point rise in the Dow.  US Futures are also higher this morning.

Oil:$86.82                                                   Gold:$1389.20

HAVE A GREAT DAY & GOOD LUCK

ECB’s Trichet on the Wires

• Better supervision should mean more stable financial system
• ESRB wont affect ECB monetary policy mandate
• Europe needs ‘sound fiscal policy’
• Inflation expectations are well anchored
• Macro-Prudential view should lead to better regulation
• Governments must adhere to more effective surveillance

ECB’s Trichet on the Wires

• Can decide on standard, non-standard tools separately
• ECB Could do one, the other or both on exit
• Rate Decision will depend on price stability
• Exit of unconventional tools depends on financial markets
• Current situation remains ‘very demanding’
• ECB, FED ‘closely aligned’ on price stability
• Sees need for ‘quantum leap’ of governance
• Price stability definition proved to be ‘crucial’
• ECB never pre-commits on interest rates
• Must keep ability to react to unforeseen contingencies
• Interest rates are ‘appropriate’
• Must remain ‘mindful’ that euro area has 16 states
• Euro region isn’t a ‘fully-fledged political union’
• Non-Standard measures are ‘temporary’ by nature
• ECB must ensure that banks don’t become reliant on cash
• Tools must aim at reactivating private markets
• Euro region isn’t a fiscal union with unified bond market
• Non-Standard measures aim to remove ‘major roadblocks’ 

ECB President Trichet on the Wires:

Trichet Says:

• Global economic recovery is ‘uneven’
• Uncertainty still prevails ‘there are risks’
• All central banks aim to anchor price expectations
• Advanced economies see price stability at around 2%
• Growth potential could be higher in advanced economies
• Anchoring inflation expectations inspired Fed’s move
• Central bankers discussed capital inflows
• Term ‘currency war’ was not mentioned at all
• No central banker said they pursue weak currency
• Progressively more FX flexibility is desirable
• Didn’t discuss Zoellick’s gold standard proposal
• Need to avoid excessive FX volatility

ECBs Trichet gives his views and the lower dollar continue

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