The European Central Bank decided to keep its main interest rate unchanged, sending the euro down and frustrating euro bulls. Still, many euro supporters remained unfazed by this decision and hope for another rally of the currency.
Based on its regular economic and monetary analyses, the Governing Council decided to keep the key ECB interest rates unchanged following the 25-basis point increase on 7 April 2011. The information that has become available since then confirms our assessment that an adjustment of the very accommodative monetary policy stance was warranted. We continue to see upward pressure on overall inflation, mainly owing to energy and commodity prices.
Trichet also said supporting price stability is “guiding principle” and that the policy makers “will continue to monitor very closely all developments with respect to upside risks to price stability”. This statement gave excuse to traders to remain bullish on the euro as many economists believe that such words means the ECB will increase the interest rates in June. The euro indeed may regain its strength very fast as it’s already recovering after the yesterday decline.
EUR/USD traded at 1.4574 as of 1:56 GMT today after it slumped yesterday from 1.4823 to 1.4536. EUR/JPY fell on the previous trading session from 119.54 to 116.40, and today the currency pair climbed to 117.37.
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