EURUSD Breaches the 1.44 Level

The ECB hiked the refinance rate by 25bp as expected, but the tone of the press conference was not enough to push market participants' expectations too far in either direction. Although ECB President Trichet did not indicate that yesterday's rate hike was the first in a series, he did once again say that the ECB will act as needed and that interest rates remain exceptionally low. He added that it is paramount to avoid second-round effects and that the ECB will do all in order to ensure price stability. Rate expectations have stayed stable following his comments. Along with stable risk sentiment, this is keeping the euro well supported, where it traded slightly above the 1.4400 mark during the Asian Session.

Eurozone finance ministers are holding an informal meeting in Hungary and they are expected to discuss the pending aid package for Portugal, though a formal request still needs to be extended by Portugal. The meeting should not yield much, as the package will take a couple of weeks to craft, and the press cited a senior EU source saying that the plan will be agreed before the June 5 election. German Deputy Finance Minister Hoyer said that the Portugal decision to take EU aid is right and responsible, and that without the EFSF, Portugal and Eurozone could have been very much at risk.