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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: ild who wrote (245515)	6/13/2003 10:53:32 AM
From: Haim R. Branisteanu	of 436258

Euro in check as ECB cools down easing talk A combination of ECB remarks dampening talk of a looming rate cut and concerns with Germany's fiscal affairs prevented the euro from extending beyond the 1.18 level. French provisional May CPI ended flat on the month and rose +1.8% y/y while the April trade surplus rose to 591 mln euros from 122 mln euros. Meanwhile, Q1 non-farm payrolls fell 0.3% to a revised 15,449,300 In a reference to the recent chorus of comments from the ECB dampening chances of another interest rate cut, ECB Governing Board member Domingo Solans said the central bank is dampening rate cut talk because it has already cut last week . From his part, ECB's Welteke did talk about the potential benefits of the weakening dollar on the US trade gap but that the impact should not be overestimated given the US deficit with Asia. Germany's precarious budget position is drawing more attention after credit agency Fitch said it would conclude a contentious rating review on Germany shortly. Meanwhile, German Economics minister kep the fiscal rules up in the shelf after indicating there was need to discuss the stability pact during a period of weak growth. France Finance Minister Mer said the speed of euro's rise vs dollar was inconvenient while predicting European growth would be mediocre in Q2 due to war impact. The comments from Mr. Mer on the euro rise stand in contrast to Mer's US counterpart Snow describing the dollar's decline as orderly. The differences in comments tell the unfolding story of two nations' views on their diverging currencies. Should the differences in views and currencies persist, then markets could start interpreting the divergence in opinions as the beginning of a competitive devaluations war-a battle that is uneven due to the lack of currency policy control in the case of France and the rest of the Eurozone. Meanwhile, German Finance Minister Eichel reiterated he is not thinking of resigning.

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