ECB to Consider Rate Cut at its Thursday Meeting

The European Central Bank will be meeting tomorrow to consider a change in the Euro interest rate target.

The market widely expects a 50 basis point cut from 2.5% to 2.0%, which is still at a substantial premium to the US interest rate range of 0 to .25%.

Yesterday rumours of a deeper 100 basis point rate cut swept the trading desks and roiled the Euro/Dollar cross taking it down below support at 1.32. This provided a lift to the euro-heavy Dollar DX Index.

There is key support for the euro at 1.30. If Trichet holds the line at 50 basis points and does not signal rate cuts commensurate with the aggressive quantitative easing of the US Fed we would expect the euro to a few more sparks for the week, in addition to the JPM and Citi earnings reports.


Wall Street Journal Europe
ECB Expected to Cut Rates as Inflation Worries Ease
By NINA KOEPPEN
JANUARY 13, 2009, 6:15 P.M.

FRANKFURT -- Most economists say they believe the European Central Bank will continue with its monetary easing campaign and cut interest rates by half a percentage point Thursday to stem the risk of a deepening recession in the euro zone, although policy makers have given no clear signal about their decision.

Thirty-four of 42 private-sector banks polled by Dow Jones Newswires expect the ECB to cut the key policy rate to 2% from 2.5% currently. The ECB has already lowered interest rates by 175 basis points ...

European Union to Unveil €130 Billion Stimulus Plan

We can only hope that Europe follows the US model and gives the funds to a small group of bankers who, without independent oversight and accountability, can allocate the €130 Billion economic stimulus package to their industry friends and associates for executive pay and bonuses, dividends, and exclusive corporate resorts.

Economic Times
EU plans 130-billion-euro stimulus plan: Germany
20 Nov, 2008, 0359 hrs IST

BERLIN: The European Commission is planning a 130-billion-euro (163-billion-dollar) economic stimulus programme, a spokeswoman for the German economy ministry said Wednesday.

"That represents one percent of gross domestic product for each member state," she told AFP.
"For Germany, that means 25 billion euros."

German news weekly Der Spiegel reported earlier that the Commission would also set aside some of its own funds to arrive at the 130-billion-euro sum.

The Commission is due to present proposals to grapple with the impact of the global financial crisis on November 26.

Commission spokesman Johannes Laitenberger said no decision had been taken on the stimulus package.

"It is premature to talk about the size and specific orientation of the package because the preparatory work is still underway and there has not yet been a definitive political decision," Laitenberger told reporters.

German government spokesman Ulrich Wilhelm stressed that Berlin had just committed 32 billion euros over the next two years to its own economic jumpstart plan and expected that to figure in Brussels' calculations.

"It is unimaginable that our own programme would not be taken into account" by the EU Commission, he told the daily Financial Times Deutschland in an article to appear in its Thursday issue.

Other member states have cried poverty amid calls for a continent-wide growth plan and the European Commission is likely to seek to redirect funds committed to other efforts to the new package.

The 15-nation eurozone confirmed last week it had fallen into recession for the first time ever, with gross domestic product in the economies using the euro falling by 0.2 percent in the third quarter after a similar drop in the second quarter