HiFX: Foreign Exchange Specialists

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August 7, 2008

The ECB conformed to market expectations and held interest rates steady at 4.25% in August.  Higher energy and food costs in the Eurozone pushed annual price rises to 4.1%y/y in July producing a new record high for the nine-year-old currency region. Eurozone inflation is now running at more than double the 2.00% level the European Central Bank sees as providing price stability. However, recent Eurozone statistics have suggested that economic activity in the region is slowing faster than expected, painting a gloomy picture reinforced by business and consumer sentiment surveys across the 15 countries that use the Euro.  The Euro declined nearly 1.3% against the U.S. dollar as expectations for a rate hike later this year have decreased following the ECB’s announcement.