ECB Maintains Hawkish Tone

Hawkish comments from ECB members, a prop in European stock markets (4% in German stocks, 6% in French stocks) and positive sentiment data are creating bidding interest in the Euro - EUR/USD bounced back up towards 1.4700 and has to overcome 1.4700-10 before targeting 1.4750. ECB’S Weber, like Trichet, indicated strongly the ECB may not be going down the rate cut route, saying that ECB rates are still accommodative. Also, he said market rate expectations may be “wishful thinking”, and said inflation risks are to the upside and that the ECB will not tolerate second round effects.

German IFO business climate index rose to 103.4 in January, well above forecast of 102.2, and up from 103 in December.

USD/JPY declined to around 105.00 but then bounced strongly up to 107.40 on Wednesday. If global stocks close upward, they are likely to help USD/JPY.

rance’s second-largest bank Societe Generale SA reported a 4.9 billion-euro (S$7.1 billion) trading loss, the largest in European history, and blamed the stock index futures losses on a rogue trader. However despite that, the bank expected to make a net income of 600-800 million euros for 2007.

Thursday:

US existing home sales 1500 GMT

US Treasury’s Paulson and ECB’s Trichet speak on risk 1620 GMT

Former Fed’s Greenspan speaks on economy 1930 GMT

Japan CPI 2330 GMT

Friday:

German GfK Consumer Confidence 0710 GMT

Canda CPI 1200 GMT

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