Forex:Trichet’s remarks cause Euro to slip, but then recovers against US Dollar

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The European Central bank Governor, made comments on Tuesday morning that initially affected the euro, causing it to dip against the greenback. After Jean-Claude Trichet mentioned that he “entirely” shares the US’s view that a strong Dollar is in the US interest, the EURUSD pair slipped to touch a four-day low at 1.4492 in the Asian session and opened the European session at 1.4530.

A senior analyst at Bank of Tokyo-Mitsubishi UFJ said that the world’s policy-makers are increasingly worried about the Dollar’s fall.

Talking to two Finnish newspapers, the ECB Chief also gave his opinion that he does not view any increase in inflation in the EU, which gave a signal to traders to start closing long Euro positions against the USD. He does not believe that inflation expectations have risen to alarming levels.

Investors believe that the Euro has been rising too far and is probably due for a pull-back.

All eyes are on the US Federal Reserve’s two-day policy meeting that starts later today. It is expected that the Fed will allow the USD600 billion bond-buying program to be completed in June and will not tighten monetary policy any time soon. If Fed Chairman does not drop any hints of an interest rate decision, the US currency will remain fragile and not gain anytime soon.

This helped the Euro recover against the US Dollar in later morning trading, boosting EURUSD up by over 80 pips to regain losses, hitting as high as 1.4614 at time of writing.