Monday, 28 Mar 2011

Euro Strengthens vs. Dollar Following Trichet's Speech

The euro recovered its losses against the U.S. dollar in midafternoon trading on Monday after a speech by the European Central Bank (ECB) President, Jean-Claude Trichet, supported speculations that the ECB will hike interest-rates in April.

The 17-nation currency surged today after Trichet said that inflation rates are durably above the price stability target, hinting that the ECB will raise interest-rates in order to fight inflation.

The euro gained about 90 pips against the dollar in afternoon trading, and the EUR/USD pair reached as high as the 1.4115 level. The euro also gained about 60 pips vs. the Japanese yen, and the EUR/JPY cross is currently trading near the 115.20 level.

Looking ahead to tomorrow, the most significant news event in the economic calendar looks to be the U.S. Consumer Confidence release. This report measures the financial confidence among U.S. residents, and tends to have a large impact on the market. Analysts have estimated that March's survey has fallen to 64.9 from 70.4 in February. Such a result has potential to further weaken the dollar against the euro.