Euro surges after ECB’sTrichet hints of rate rise next month

Julian Harris
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THE euro jumped to a four-month high against the dollar yesterday, after European Central Bank (ECB) President Jean-Claude Trichet dropped hinted that interest rates could rise soon.

Despite holding rates at one per cent for now, Trichet said “strong vigilance” was warranted, with the ECB “prepared to act in a firm and timely manner” to suppress inflation.

In previous years the ECB has used the term “strong vigilance” in the month before a rate hike.

“The re-financing rate looks almost certain to go up to 1.25 per cent on 7 April,” commented Ken Wattret of BNP Paribas. “It’s not quite a done deal, but barring a radical turn of events over the next month, the ground has been well and truly prepared for the move.”

Trichet’s comments caused the euro to soar to more than $1.395.

Data earlier this week showed Eurozone inflation running at 2.4 per cent in February, a 28-month high.

The single currency area seems to be recovering well, according to other data released yesterday. GDP for the final three months of the year was confirmed at 0.3 per cent, with broadly based growth.