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EUR/USD Tumbles on Trichet’s Comments & Good US Reports

February 3, 2011 by

President of the European Central Bank Jean-Claude Trichet said that inflation risks are “broadly balanced”, reducing bets that ECB will raise interest rates and driving EUR/USD down. At the same time, US service industries and factory orders posted surprisingly good results, supporting speculations that the Federal Reserve may decide to increase interest rates in the US. EUR/USD trades now at 1.3632, while it opened at 1.3809.

Initial jobless claims decreased to 415k last week from the previous week’s revised figure of 457k. Market participants expected a decrease to 420k. (Event A on the chart.)

US nonfarm productivity increased at a 2.6% annual rate during the fourth quarter of 2010, compared to the 2.4% growth in the third quarter. Market counted on lesser productivity of 2.1%. (Event A on the chart.)

ISM services rose to 59.4 in January as economic activity in the non-manufacturing sector grew for the 14th consecutive month. The report was rather good as forecast promised the index to rise only slightly above December value of 57.1 to 57.2. (Event B on the chart.)

Factory orders posted an increase by 0.2% in December, surprising Forex analysts who expected a decline by the same 0.2% rate after an advance by 1.3% (revised from 0.7%) in November. (Event B on the chart.)

EUR/USD for 2011-02-03

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