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Traders who listened to the Trichet statement heard his ultra Hawkish words, as he sees the Euro Zone economy in strong shape, and affected by sub-prime issues a lot less than may have been anticipated.

Traders should maybe listen well to this line;
“The growth of bank loans to the domestic private sector has remained robust in recent months, which may suggest that the supply of credit has not been impacted so far”

The Markets are divided into two camps; one which believes sub-prime is spreading through Euro-land, and the other which say that Europe will flourish despite US speeding toward recession.

Since Trichet spoke only about Rate Hikes, Spiral Inflation, act pre-emptively (this was the most used phrase), Inflationist pressures and most importantly Euro-zone reaching its potential GDP rate in Q4, a lot of Traders switched camp.

This big shift was easily seen in charts moving higher, and what is as important is Institutional Trade Desk may be realigning their overall positions to Dollar short; the Aussie broke, and the Swissy broke on big volume.

Don’t get this wrong, there isn’t a big Party going on in Europe that the rest of the Globe wasn’t invited to; downside risks still exist, especially when someone as influential as Mr. Trichet says that uncertainly in the Markets are high, and the impact of financial turnover in the real economy is not fully known.

Traders should note that all except one EU Members that has a Free Currency Float increased rates in the last period and still, Trichet warns them about Inflation a couple of times.

Poland, Sweden, Czech Republic and Romania hiked, whilst Hungary cut Interest Rates. All these countries showed in the last months, increasing HICP numbers.

Does this look like a measure to reduce some Inflationist pressures? To us it does, but it’s probably a temporally method only. None the less, we have been Euro Bulls through all of 2007, set our stall out that we are not selling Euros to buy Dollars, and now await the test of 1.5000 and maybe a kiss of the 1.6000 if the Dollar Index breaks 75.00.

- Semar TheLFB Team’s Man in Europe

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What turned out to be a great intraday setup at the start on the AUD-CAD 30 min chart, bombed and trigger my stop loss then continued to its meteoric rise to my projection target. What should have been a 100 pip profit turned out to be a -23 pip loss although the blame can be placed on myself for not following strict in-trade management (due to sleepiness) as price broke the 50-day moving average in which I could have also played the re-trace up given the strength of the Aussie dollar. But hey, you live, you learn. The two horizontal blue trendlines were my profit targets #1 and #2.

In other news, turns out the much anticipated rate cut from the Bank of England turned out to be a non-event with the consensus of leaving the rates unchanged despite looming growth in the housing and financial sector and concentrating on inflation.

On the ECB side and as predicted, no changes to the rates and remains the steady currency it is for the time being.

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If you have been watching the news in the forex market lately, you have definitely heard about the “Carry Trade.” For many forex traders, however,—especially those just getting started—the Carry Trade can be confusing.

Have you ever asked yourself the following: Why has the Carry Trade has been so dominant for the past few years? What does it mean to unwind a Carry Trade? What is rollover?

S. Wade Hansen of PFXGlobal.com sat down for an interview with the founder of TraderInterviews.com, Tim Bourquin, to answer these questions. What the Carry Trade is, why so many big institutional investors and smaller retail traders like to use it and how you can take advantage of it in your own account will be further explored in the interview.

Click here for a link to the interview:

http://www.pfxglobal.com/index.php?option=com_content&task=view&id=1803

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With all the hype recently about Goldman Sachs being the only major investment bank to avoid being stung in last year’s subprime mortgage fiasco and the record profits it rung up last year, bonus time was expected to be a time of good cheer for Goldman employees.

But, according to The New York Post, some were not so happy with their year-end stocking stuffers. The paper, citing “whispers”, said that some cost center employees, the back office operations, IT employees and such, were getting stiffed.

The firm’s chief executive, Lloyd C. Blankfein, was rewarded with a record $67.9 million bonus, while its co-presidents, Gary Cohn and Jon Winkelried, each received bonuses of about $40.5 million, up 58 percent from last year. And the bank also set aside 20.2 billion to pay employee wages, benefits and bonuses this year, a 23 percent increase from last year.

But cost center workers expecting 75 percent of their salary as a bonus, got only 15 percent, the newspaper said.

Link

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