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The ECB meets Wednesday and sentiment is high for a 25 basis point cut. But if inflation data continues to be higher than the two percent inflation target, there may be no rate cut at all. For example, the Dutch inflation rate soared last month, thanks to foot and mouth disease. But once again the market has gotten way ahead of itself with some analysts calling for the ECB to cut rates by 50 points. The euro's fate will hinge more on what the European Central Bank will do at Wednesday's meeting (which will be followed by a press conference as is the custom after the first meeting of the month). For those who might argue that the Dutch economy isn't big enough to worry the ECB, chief economist Otmar Issing said the ECB is concerned about a series of small price rises that become imbedded in other pricing decisions, particularly wage increases, and that this sets a pattern for the bigger countries. In this regard, the ECB will pay close attention to 4th quarter wage data due out Monday, as well as Spanish March CPI data, due next Wednesday.
The ECB is fighting a perception of benign neglect with regards to the economy, and needs to pacify the market with some sort of action, otherwise the euro probably will be punished again. But a cheap euro does help exports, and growth.
This will be a short week as most markets are closed on Friday.
Introduction Global Stock Market Indexes Recap of Global Markets Currencies Indicator Scoreboard
The Bottom Line Looking Ahead
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