Currencies: Euro Lurches to All-Time Low on ECB Move but Snaps Back

The U.S. economic data, meanwhile, are causing considerable volatility.
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Overnight the dollar remained close to yesterday's closing levels ahead of today's announcements from the U.S. and the European Central Bank. After the data some significant volatility is apparent.

In the U.S., the first-quarter

Employment Cost Index rose 1.4%, considerably stronger than expected. First-quarter

GDP came in at an annualized rate of 5.4%, somewhat below market expectations.

As widely anticipated, the

European Central Bank

raised its refinancing rate to 3.75% from 3.5% following its meeting today. Immediately after the announcement the euro fell to new all-time lows of $0.9140 from its earlier level of $0.9210. The euro/dollar is again trading around $0.9210.

"The substance of the ECB move is pretty much as the market was expecting. Interest-rate markets are largely unaffected but the currency market perceives the ECB as having little ammunition left," said Malcolm Barr of

Chase

in London. "Overall it's the right move, and to be honest it appears that the euro will continue to weaken from here."

Maintaining the steady drumbeat of supportive public relations for the euro, the German Chancellor

Gerhard Schroeder

expressed confidence the euro would provide a basis for long term economic growth in Europe. "The European market and the introduction of a common currency strengthen the competitiveness of all member states and will have a positive long term impact on growth and employment," Schroeder said.

Dollar/yen is opening little changed at 106.15. Euro/yen is now trading at 97.70.

U.S. dollar/Canadian dollar is opening firmer at C$1.4775.

Dollar/Swiss franc has continued to look soft vs. the dollar and saw lows of 1.7225 dragged down by the euro's weakness. The SF is now trading around $1.7075.

Sterling has lost ground against the dollar and is trading at $1.5735. Euro/sterling has moved above its record lows to close at 58.50 pence. The U.K. government announced that the proceeds of mobile phone license auctions will be used to reduce debt interest, and this was seen as lowering pressure on interest rates.

The U.K. trade deficit eased in February to 2.4 billion pounds from 2.75 billion in January.

Following yesterday's suggestion that it was premature for Greece to join the euro, the drachma fell to 336.50 per euro. Today the Greek currency recouped most of the loss.

The Australian dollar has been unable to move off its lows and continues to trade around $0.5880.