Interventions by central banks are never viewed particularly favourably by the currency markets by the currency markets and always lead to a sell off of the currency concerned. This has happened to the euro following the ECB’s recent intervention. The most to suffer was the euro/yen cross as speculators rushed to close out their trades and bank their profits. A fall in the euro dollar also ensued and the bank’s statement that “it stood ready to act” only made the market more suspicious. Other central have also pumped money in the system but without comment.

My own personal view is that despite tough talk from the ECB about continuing to raise rates in September and October this crisis has been the perfect opportunity to take some heat out of the euro. An exchange of rate 1.4 plus to the dollar would, in my opinion, be too much for most of the eurozone economies. The cost of louis vuitton, gucci, prada, dior etc would just be too much in the lucrative markets of russia and the far east!

Also as I have been saying in this blog for some time, the GBP/USD would turn somewhere between 2.03 and 2.1 – it seems from the recent charts that this point may have been reached at 2.06. Whilst I don’t normally try to forecast tops and bottoms as it is a mugs game, on this occasion I felt strongly that this would be the area that the pair would turn. Similarly with the EUR/USD in the 1.38- 1.42 region – now we must wait and see if the move downwards is the start of a trend or merely a short term reversal with the key points for the GBP/USD being in the 1.96 region. If prices penetrate this support area then expect them to move lower in the next few weeks.