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ECB Holds Key Rate, EUR/USD Sinks

May 5, 2011 by

EUR/USD slumped today after the European Central Bank kept its main interest rate unchanged. (Event A on the chart.) ECB President Jean-Claude Trichet said that the policy maker will watch the inflation “very closely”, suggesting that the Bank may lift rates in June. The euro’s rally stalled this weak and the EUR/USD currency pair was weakening today, but ECB rates decision turned the gradual decline into a sharp drop. The US unemployment claims climbed unexpectedly last week, confirming the problems with the labor market that were demonstrated by the yesterday’s ADP employment report. EUR/USD trades at 1.4695 now.

Initial jobless claims unexpectedly jumped from 431k to 474k last week, while analysts predicted a drop to 415k. (Event B on the chart.)

Nonfarm productivity (preliminary) grew 1.6% in the first quarter of 2011, compared to the forecast value of 1.1%. The growth in the fourth quarter of 2010 was revised from 2.6% up to 2.9%. (Event B on the chart.)

EURUSD for 2011-05-05

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