There is currently “no significant evidence of underlying domestic inflationary pressure building up in the euro area”, Trichet said yesterday after the bank left the rate unchanged at 2%.
The Federal Reserve raised its target rate a quarter-point to 2.5% on Tuesday. Against the euro, the dollar strengthened to $1.2956 at 9:20am in New York, from $1.3027 late on Wednesday after the ECB announcement.
“Trichet has signalled pretty clearly they’re not going to move on interest rates soon,” said Shahab Jalinoos, a currency strategist at ABN Amro Holding in London.
The euro may weaken to $1.2930, he said.
The euro fell 3.8% against the dollar in January, in part on speculation the interest-rate gap between the US and the in part on speculation the interest-rate gap between the US and the eurozone will widen. The Fed’s benchmark rate now exceeds the ECB’s by a half point.
Neil Jones at BNP Paribas in London said: “We expect the Fed to hike rates more than any other large economy this year.”
The US currency may extend yesterday’s gains on expectations a US government report tomorrow will show that US employers created the most jobs in three months in January.