HiFX: Foreign Exchange Specialists

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May 8, 2008

The European Central Bank conformed to market expectations and left interest rates unchanged at 4.00%.  Eurozone inflation is likely to remain elevated until the final quarter of the year and unless growth deteriorates dramatically the ECB are unlikely to shift their focus from ensuring price stability.  However, within the accompanying commentary ECB President Trichet added that inflationary pressures are expected to be “temporary” which implies the ECB would be able to cut interest rates to promote growth if the need arises.  Following the ECB rate announcement the Euro pared back losses against the USD, firming up 0.8%.