The ECB hiked rates as expected and Trichet lead the market to expect another hike is on its way in December, though he demurred in commenting on the Bank"s plans for 2007. He did not repeat the phrase "strong vigilance", but he usually does not on the day of a rate hike. Look for the rhetoric to be ratcheted up between now and the December meeting. Trichet was extremely upbeat on the Eurozone outlook, but his optimism did the EUR no favors. His remarks on EUR/JPY helped knock the cross down to 149.00 and EUR/USD to 1.2673 from 1.2728 before he spoke.
The US economic backdrop perked up a bit today, helping back up rates and mildly support the USD ahead of tomorrow"s important employment report. Weekly jobless claims fell 17k while chain store sales rose robustly. 70% of retailers reported stronger than expected sales. The market anticipates a rise of 125k in new jobs tomorrow. With any luck, the number will miss the market badly and give traders a much needed dose of volatility. German industry orders are out during European hours, seen falling 0.5%. Expect a muted reaction ahead of payrolls.
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