Dollar trades higher as it’s rallied against euro!
On Thursday, US dollar rallied to its highest against the European currency after slashing of its growth outlook for 15 nation provinces by the ECB or European central bank, advancing the probability of interest rate cuts.
With Jean Claude Juncker’s remark the euro got deeper in loses. The chairman of euro zone finance ministers spoke about zone’s single currency being overvalued in spite of existing fall.
Jean-Claude Trichet, ECB President, said that the uncertainty of euro zone economy was particularly high. His statement came after bank left it standard 4.25 percent of lending rate on Thursday. Trichet also warned against high inflation and risk of it moving upside.
Chief FX strategist at CMC Markets U.S, Ashraf Laidi, said that in spite of Trichet’s hawkish attitude on inflation markets are more focused on growth downgrades of European central bank for euro zone. He also added that this has boosted up the probability of easing of ECB in latter half of year 2009.
The ECB staff now forecasts growth in the euro zone for 2008 at between 1.1 and 1.7 percent. For 2009 it forecasts growth between 0.6 percent and 1.8 percent.
The U.S. dollar rallied on Thursday to its highest against the euro this year after the European Central Bank cut its growth outlook for the 15-nation region, boosting the likelihood of interest rate cuts.
The euro deepened losses after the chairman of euro zone finance ministers, Jean-Claude Juncker, said the zone’s single currency was still effectively overvalued despite its recent fall. For details see [ID:nL4400641] and [ID:nBRM000070].
Euro zone economic uncertainty was “particularly high,” ECB president Jean-Claude Trichet said after the bank left its benchmark lending rate at 4.25 percent on Thursday. But he cautioned inflation remains high and risks are to the upside. [ID:nL4102376].
“Trichet maintained his unambiguously hawkish language on inflation, but markets are largely focusing on the ECB’s growth downgrades for the euro zone,” said Ashraf Laidi, chief FX strategist at CMC Markets U.S. in New York. “This bolsters the possibility of an eventual ECB easing in the second half of 2009.”
The ECB staff now forecasts growth in the euro zone for 2008 at between 1.1 and 1.7 percent. For 2009 it forecasts growth between 0.6 percent and 1.8 percent.