While the global economy is slowing, ECB president Trichet says a number of positive factors are being under-appreciated. He mentions the decline in oil prices in particularly and commodity prices in general, as well as fiscal stimulus. Past monetary policy expansion is probably under appreciated, he says. Non of the economies of the G-10, where he is speaking today, sees a big deflation risk, he says.
As we’ve seen already this morning, there is a camp out there (count us as a member) who think Trichet is smoking something he picked up in Amsterdam. He’s behind the curve and look like he is happy to stay there.
EUR/USD is at session lows of 1.2555, dragged down by a further collapse in cable. GBP/USD triggered yet more stops below 1.3800 while EUR/GBP is 0.9100.
