European Central Bank President Jean-Claude Trichet announced during a speech at the European Banking Congress in Frankfurt that it is time to withdraw some of the policy measures which supported  financial system through the credit crunch. He said the ECB would soon be pulling some of its liquidity-providing “extraordinary measures” ( quantitative easing policies) to ensure they don’t cause an inflation threat. European Central Bank is expected to provide details on how the programs will be scaled back at its Dec. 3 meeting. 

ECB was the most reserved of the major Central Bank when it came to injecting markets with liquidity earlier in the crisis, so it is no surprise they would be among first ones to bring it to a halt. European policy makers don’t want to repeat the mistakes of the past, when very cheap credit helped create dangerous imbalances and asset bubbles. However, we shouldn’t expect very drastic actions soon, since it was acknowledged that the danger is not over yet. Trichet called on banks to make more credit available, other than hording cheap money that was made available to them by governments. He made a point of reminding financial institutions to keep bonuses in check. Yes, everybody is really paying attention to that part.

It doesn’t look like any of this had effect on currencies. They largely continued yesterday’s trends, if at a slower pace. This means USD has been stronger, as well as Japanese Yen. Euro became the strongest of European currencies, which was not necessarily all that good for me. After all, I was short EUR-GBP, on the wrong side Euro trend.

This was mentioned in the Samurai Bond post. I went short at 0.8943 and closed this trade today for a loss of 36 pips. I’ll will review longer term charts of this pair over the weekend and decide what to do next. Probably still look for short trading opportunities. Outside of that, week has been very good. Weakness of New Zealand Dollar, which I had been waiting for, finally arrived, producing some good trades. This theme will contunue in near future.  Earlier on Canadian Dollar also created good very good set ups. Nothing to complain about going into holiday week which historically sees very light action. Have a nice weekend.

Mike K.