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In a surprise move, the

European Central Bank

today hiked interest rates by 25 basis points to 4.75%. Most analysts had anticipated that rates would not be changed this month.

There was an immediate impact in the currency markets, with the euro jumping about a third of a cent higher to open in New York at $0.8765.

"We were surprised that more people didn't expect the rate rise," said Steve Barrow of

Bear Stearns

, who had correctly forecast the hike earlier in the week (he was outnumbered 3 to 1 by analysts predicting no rate change). "Inflation pressures are increasing, and September data will be bad -- and not just related to oil. They're trying to nip it in the bud now," Barrow explained. "Probably the main reason is the intervention -- it seems obvious that you need to make a monetary policy response."

There was also good news for the euro in Germany today. The ranks of the unemployed fell by 18,000 in September, decreasing the jobless rate to 9.4%.

On the other hand, the latest monthly sentiment index for the euro-zone was not so encouraging. The index slipped a full point in September, to 103.2 from 104.2.

The ECB wasn't the only central bank handing down interest rate verdicts today. The

Bank of England

also convened. The results of that meeting were more in line with expectations: The central bank left U.K. rates unchanged at 6.0% in the face of a slowing domestic economy and a strong pound.

Sterling opened lower at $1.455 following the decision. Still, the news was generally well received, since stable rates are seen as appropriate in the current economic circumstances.

The U.K. government hopes that the pound will weaken against the euro from its current level around 60.15 pence.

Tomorrow forex market attention will be focused on the key U.S.

employment report

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definition |

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) for September.

The yen is now looking a little soft. The Japanese currency opened at 109.25, which is seen as a key resistance level. In an obvious attempt to influence the market,

Haruhiko Kuroda

of the Japanese

Ministry of Finance

contended in a recent speech that the euro intervention two weeks ago had been a success. "The euro has stopped falling due to the joint intervention in the foreign exchange market before the G7meeting." he said. He also asserted that there was no need for the yen to rise.

The euro/yen cross is moving in favor of the euro, opening at 95.75 yen.

Dollar/Swiss franc firmed to open at SF1.7375, with euro/Swiss franc also stronger at SF1.5230. The

Swiss National Bank

left its interest rates unchanged today.

The Canadian dollar has held on to recent gains. It is opening at C$1.4970.

The Australian dollar is trading at $0.5375. The currency has not managed to build a base for a reversal of its long-term downtrend.

The New Zealand dollar is slightly lower overnight at $0.4035.

The Polish zloty is modestly lower at 4.56. However, expected forex inflows should underpin the currency.

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