Euro weakens on ECB comments

The euro weakened on Thursday after the European Central Bank voted to keep interest rates at 2.5 percent. While some analysts still expect a rate increase in May, the president of the ECB made comments after the decision that indicated that the Bank is not leaning in that direction. Some analysts responded by saying that while a May increase seems unlikely, there will probably be a hike in June. Other analysts are standing by their predictions of a move in May, basing their opinions on available data.

The single currency was up to $1.2333 against the US dollar, a seven-month high, and at ¥144.92 against the Japanese yen, before the Bank’s decision was announced. After the news, the euro dropped 0.4 percent in relation to the dollar, to $1.2219 and declined by 0.3 percent versus the yen to ¥143.88

In the UK, where the Bank of England also voted to keep interest rates at their current level of 4.5 percent, sterling added 0.5 percent versus the euro to £0.6979 after having dropped to £0.7021 against the shared currency, a fifteen-month low.

The US dollar moved very little on the day in relation to sterling and the yen as most analysts agreed that the US Federal Reserve will likely only raise interest rates one more time, to 5 percent, before pausing in its series of increases. The greenback was up 0.1 percent versus sterling to $1.7506 but it fell by 0.1 percent in relation to the yen, to ¥117.75. The dollar was also down versus the Chinese renminbi, to Rmb8.0050.

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