Euro rises sharply, bonds slump after Trichet interest rate comments
forbes.com
comments UPDATE
11.18.2005, 09:43 AM
LONDON (AFX) - The euro rose sharply after European Central Bank president Jean-Claude Trichet said the central bank is ready to take a decision to raise interest rates.
At 2.22 pm, the euro was trading at 1.1742 against the dollar, compared with 1.1675 just before the Trichet comment.
Meanwhile, European bonds slumped, with the benchmark German bund future falling to 119.44 from 119.85 previously.
'After two and a half years of maintaining historically low interest rates, I consider that the governing council is ready to take a decision on interest rates,' Trichet said in a speech at the European Banking Congress this afternoon.
Higher interest rates will contribute to sustainable growth and job creation in the euro zone, Trichet said.
In the wake of data showing a pick-up in the euro zone economy, as well as a series of hawkish comments from ECB officials in recent weeks, market players have speculated that the ECB will hike rates at its next meeting on Dec 1.
Today's news will put paid to doubts over whether or not the ECB will start tightening rates next month, after news reports in recent days suggested that the ECB had not yet reached a consensus on a December move.
'Trichet actually surprised the markets by coming out with such a forthright comment and the euro had no other way to go. He has more or less confirmed that the ECB will raise rates by 25 basis points on Dec 1,' said 4CAST currency analyst Mike Berg.
He added that the dollar had been moving higher against the euro throughout the day, but Trichet's comment entirely reversed that trend. |
