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Weidmann opens the door to an ECB rate cut and foresees a lost decade in Europe

FXstreet.com (San Francisco) - Jens Weidmann, the Bundesbank’s president, has affirmed that the European Central Bank could cut its interest rates if economic data continues worsening, according to an interview published by WSJ.

Market has been speculating about the possibilities of the ECB cutting rates and now with inflation below the 2.0% it seems more than probably in May or June. However, Weidmann said the ECB “might adjust in response to new information," but he doesn’t “think that the monetary policy stance is the key issue."

"A point that I think is important to make, perhaps less for my central bank colleagues than for finance ministers,” Weidmann pointed, “is that the medication monetary policy makers administer only cures the symptoms and that it comes with side-effects and risks."

The important thing, according to Weidmann, is the development in the reforms at the national and European level.

The Bundesbank president also states that the European recovery will take as much as a decade. The opinion is contrary on other Europ leaders who said that the worst of the crisis is over. “"Overcoming the crisis and the crisis effects will remain a challenge over the next decade,” Weidmann affirmed.

Forex: EUR/CAD tumbles on ECB Weidmann’s suggestion of rate cut

The EUR/CAD is at a fall, not in reaction to the BoC monetary policy announcement but to Buba’s Weidmann interview to WSJ suggesting a ECB rate cut soon if economic data remains gloomy, where he also warns of its side-effects: “Medication monetary policy makers administer only cures the symptoms and that it comes with side-effects and risks”. Weidmann believes it might take a decade for Europe to recover. The EUR/CAD fell from just below 1.3500 to print a low at 1.3386. The market has bounced back above the 1.3400 and is trading at 1.3425.
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Forex Flash: EUR/CAD minor corrections to remain limited to low 1.33 area – TD Securities

TD Securities analysts observe that short-term patterns look somewhat less constructive for the cross now after this week’s set-back for the bullish scenario and decent selling above 1.35. “Overall, we still think the main directional risk here is higher. Strong rejections of the 1.30 area on the short and medium term charts plus an inverse (bullish) H&S formation (neckline triggered in the low 1.33s) and the move above the 40-day MA all point higher for the EUR in the near-to-medium term”, wrote analysts Shaun Osborne and Greg Moore, seeing positive short-term trend momentum for the EUR, “so we rather look for minor corrections to remain limited to the low 1.33 area (neckline retest)”.
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