ECB Cut on Lending Risk Weighs on Euro

« EUR/USD - Trades Within Daily Range | Home | Euro Double-Top Slides and More.. »

By Benny Nardino | September 6, 2008

Last week the European Central Bank’s unusual moved to adjust the way she lends money to EU banks took the market by surprise on Thursday. The markets weren’t sentimental either as traders run for the hills on EUR. What does this mean to the euro-zone banking operations?

The uncertainty thus generated by the announcement means that banking in the EU will be business unusual as the cost of lending from ECB would rise. This could only put more financial strains on the markets. The long-term outlook for the EUR is nothing but grim even though ECB president, Jean-Claude
Trichet, thinks otherwise. Read the full story from the Financial Times here.

He said: “.. the bank’s main aim was to protect the euro system, but he hoped that as a consequence banks would be spurred to make greater efforts to raise funding in the open markets once more.

“[The changes] were designed to refine particular elements of our risk control framework: we wanted to be sure that the euro system remains adequately protected,” he said. “As a byproduct … we will have a positive impact on helping the market to be more active. But I would
say that we have been reasoning very, very much … with a view of optimising our risk control.”

Let hope the impact is less severe than we thought as time unfolds. Have a great weekend and wonder week ahead.

You enjoyed these posts right? Get your Auto Delivery Here!

Sphere: Related Content