ECB Trichet Expected to Keep Interest Rates and Bias Unchanged

The European Central Bank is not expected to alter interest rates at tomorrow’s monetary policy meeting.

Stronger economic data and continued inflationary pressures should also keep the tone and bias of Trichet’s post meeting press conference unchanged. Retail sales rose 0.4 percent in the month of January while service sector growth accelerated in both France and Germany during the month of February. The continual rise in oil and food prices is boosting inflationary pressures and the risk of second round effects, which is the ECB’s greatest fear. They need interest rates and their currency to remain high in order to have any chance of bringing inflation back down to their target. Therefore comments from Trichet could drive the EURUSD even higher.