Euro Fell on ECB Trichet Comments

The euro fell below 1.35 against the dollar after ECB President Trichet talked down the possibilities of further rate hikes in 2008.

The European Central Bank lifted interest rates from 3.75% to 4.00% as expected on its monetary policy meeting ended today. Trichet said on the post meeting conference that in medium term risks to prices are on the upside, reinforcing the expectations for two more rate increased this year. He added that the inflation is likely to fall in coming months and risks significantly towards end year. He also pointed out that inflation projections for the year 2008 remain unchanged, leading investors price down the likelihood of rate hikes in 2008 to 60% from 80% a day ago.

The dollar was supported after robust US data confirmed the view that the nation¡¯s economy is still in good shape. US productivity index fell from 1.7% to 1.0% in the first quarter. The labor cost rose from 0.6% to 1.8% in the first quarter, above the estimate of 1.2%.