EUR/USD (a 4-hour chart)
The euro grew to 1.3081 as the member of the Central Bank European Governing Board Joerg Asmussen said that the impact of the rate cut will be limited to the periphery as the monetary policy transmission mechanism is violated.
However, the Deputy Director of the International Monetary Fund, David Lipton warned that the eurozone could slip into stagflation as the economic downturn threatens the stability of prices and that the ECB has room to provide additional monetary support as the area is mired in a recession.
While European politicians support the reactionary approach to the risks associated with the region, Slovenia reported that they need at least EUR 900 million for its banking system by the end of July. At the same time the unemployment rate in Spain rose to a new record high of 27.16 % during the first three months of the year, as the region faces a deepening recession.
However, the growing speculation of ECB rate cuts, Central Bank President Mario Draghi may take a very dovish tone for monetary policy meeting on May 2, and the Governing Council may have little choice but to carry out its easing program cycle for 2013 as the region struggles to return to growth.