The euro rose to five-month high vs. the dollar as a jump in producer prices furthered the case for an ECB rate hike.
The single currency climbed to highs at $1.4268 following a report that producer prices rose 6.6% in February over the previous year. Surging energy prices fueled the spike in producer prices and follows a report last week that European inflation rose 2.6%, exceeding the ECB’s target 2% for the fourth consecutive month.
In response, the ECB is widely expected to raise interest rates at its meeting on Thursday for the first time since October 2008. The euro’s recent ascent, driven largely by interest rate expectations, had eased somewhat last week as lingering concerns over Portugal and Greece resurfaced after S&P downgraded Greece to BB- and kept a negative outlook on the country.
Despite this, the euro is likely to remain supported going into Thursdays ECB meeting. Although an interest rate hike is largely priced in, markets will be watching for the ECB’s statement for prospects of further rate hikes.(www.ibtimes.com)