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Market Review - 18/02/2011 20:16 GMT

Euro rallies as ECB official Lorenzo Bini Smaghi signals ECB may hike rates due to inflation pressures

Euro rallied broadly on Friday after Lorenzo Bini Smaghi, an European Central Bank Executive Board member, signaled the European Central Bank may need to raise rates earlier than expected.

Lorenzo Bini Smaghi told Bloomberg in an interview that as the economy gradually recovers n global inflationary pressures arise, the degree of accommodation of monetary policy has to be monitored and, if needed, corrected'. He added that 'it is a key challenge for monetary policy is to avoid spill overs from commodity prices; this requires the ability to take pre-emptive ...

EURUSD Forecast
The EURUSD attempted to push lower yesterday, hit my bearish target at 1.3530 but whipsawed to the upside and hit 1.3711 earlier today in Asian session. This fact keeps the bullish intraday bias since bounced from 1.3428 remains intact, but note that h4 chart outlook remains sideways between 1.3800/60 – 1.3420. Immediate resistance at 1.3715. A clear break above that area could trigger further upside pressure but watch out for another resistance around 1.3743 which need to be clearly broken to the upside to continue the intraday bullish bias testing 1.3800/60 key resistance area. On the downside, a clear move below 1.3650 support area would lead us to neutral zone in nearest term testing 1.3530 and open the door for ...

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[B]It seems that European politicians will do everything to avoid this scenario – a break of European unity. But interesting times call for creative solutions, especially as there could be so many benefits for one of the strongest symbols of unity – the Euro.[/B]

Greece is on the brink of default. Yields on two year notes are at 25%. Even the ECB has abandoned Greek paper. They were the last active buyers out there. German Chancellor Angela Merkel is already preparing the public for the previously denied possibility of a Greek restructuring.

So maybe she’ll take one step forward and push for Greece to leave the Euro-zone? European leaders have called for unity – this includes politicians such as Merkel ...