Euro steady vs dollar, up vs pound on Trichet view

NEW YORK - The euro was little changed against the dollar on Thursday but surged against other currencies after European Central Bank President Jean-Claude Trichet signalled a rate increase in March.

By (Reuters)

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Published: Thu 8 Feb 2007, 9:08 PM

Last updated: Sat 4 Apr 2015, 9:53 PM

Trichet said the bank will show “strong vigilance” in monitoring euro zone inflation, potentially flagging a few rate hikes this year. But the timing of those rate increases was uncertain, leaving the dollar nearly unchanged against the euro, analysts said.

The euro was trading in a narrow range between $1.2995-$1.3015 against the dollar. However, the euro rose firmly against other currencies. Against sterling, the euro strengthened to 0.6643, up 0.6 percent on the day.

Many market participants had already priced in expectations that Trichet would sound hawkish, traders said.

“So far the ECB press conference is yielding few surprises, with Trichet confirming a March rate hike and pointing to further rate increases later in the year, but with indeterminant timing,” said Brian Dolan, director of FX research at in Bedminster, New jersey.

“The risks at this point seem to be to the euro downside since perceptions of a delay in further tightening will reduce the incentives to hold euros realtive to dollars,” he added.

Earlier Thursday, the ECB kept rates unchanged at 3.5 percent, as expected.

In London, the Bank of England Thursday also left rates steady at 5.25 percent and did not release a statement. Sterling fell after the decision as there were some minor expectations for a rate hike following the bank’s surprise tightening in January.

Sterling traded down 0.6 percent on the day against the dollar at $1.9595. Traders said the pressure on sterling against the dollar also prevented euro from rising significantly against the dollar.

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