Rising rates and concerns over dollar to drive euro up

RISING European interest rates and fresh concerns about the US trade deficit should drive the euro up against the dollar in the coming weeks.

Speculation towards the end of last week that weaker economic data from Europe might slow ECB rate hikes looks unlikely given the latest overview of the zone from the ECB. It sees growth continuing this year and next and there has been no hint from the bank that it intends anything other than further hikes this year.

Futures markets have pushed euro rates out to 3.25% by the year end against a projected 3% base rate markets have been expecting since the first hike in rates in December 2005. ECB rates stand at 2.5% but should hit 3% by the year end as the ECB moves to keep inflation down, as some growth momentum returns to the eurozone.