ECB Rate Decision Precipitates Euro collapse
July 3, 2008
The ECB, as expected raised interest rates for the first time in more than a year, by 0.25% to 4.25% in response to heightened inflationary pressures. The decision came as little surprise after ECB President Trichet signalled the move last month citing concerns over rising prices across Europe. However, the real surprise was that the tone of Trichet’s accompanying statement and subsequent Q&A session which failed to signal additional rate hikes in the foreseeable future and had a dovish flavour. As such Euro fell nearly 1.25 percent against the U.S. dollar.