The market is fully prepared for a 50 bp cut from the ECB in March after Trichet said he would not rule out rate cuts below 2% and is exploring the use of unconventional tools. Poor Eurozone economic sentiment and an uptick in German unemployment helped fuel a decline in EUR/USD this morning, as did the Trichet comments. Prices have since stabilized and recovered to the mid-1.31 handle.
US equity futures are well off their lows as New York trading begins with the S&P down less than 8 points versus 11 points earlier this morning. This has helped stabilize EUR/JPY and prompt some EUR/USD short-covering.
