dollar against 19685 dollar the day before

Despite the escalation of the euro in recent weeks, the European Central Bank continues to increase its rates. As expected, its President, Jean-Claude Trichet, announced yesterday, the rehabilitation of its main rate from 3.25 to 3.50, for the sixth time in a year. And Jean-Claude Trichet has been suggested that this movement would continue, but he did not indicate clearly when and to what level (see also page 7).

Finding that European monetary policy remained "accommodating", he stated that "the Governing Council will continue to monitor very closely all developments to ensure the stability of prices in the medium term". However, Jean-Claude Trichet used the term "follow closely", in the last months to announce a rate hike in the two months...

However, he had no recourse to the sentence that he also employed so far, before increasing rates within two months, on the need for further "the adjustment of the accommodative orientation of monetary policy." That sowed doubt in the minds of operators on the market on the date of the next rate hike and the end of the cycle of tightening.

Moreover, the President of the ECB stressed that economic growth continued to be very vigorous and risks very present inflation, on a background of possible lift prices of oil and wages. What militates in favour of a rapid tightening. But Jean-Claude Trichet also pointed out that inflation should be around 2 over the next two years, which corresponds to the objective of the Bank. The ECB has revised downward its projections for inflation to 2007, from 2.4 to 2, and announced she planned inflation between 1.3 and 2.5 in 2008. Finally, on a background of strong euro and slowdown in the economy us, "we are in a period where the uncertainties have become more marked", he said. After these statements, market operators were perplexed yesterday.

Slight decrease in the euro

"The President of the ECB intended to prepare an increase in new markets, but without saying when and to what level, to be careful, no doubt, a margin of manoeuvre in an uncertain environment", said Gilles Moec, Economist in charge of Europe at Bank of America. It continues to build on an increase in the rate of the ECB in March, while believing that this prediction has become "more uncertain" since the statements made by Jean-Claude Trichet.

Similarly, Julian Callow, Economist in charge of Europe at Barclays Capital, judge that a rise in rates in March has become less certain on bottom of downward revision of projections for inflation and recognition by Jean-Claude Trichet of increasing uncertainty.

Erik Sonntag, an economist at ING, considers, however, that the ECB will now increase its rates quickly, as early as February. But that it will be his only increased in 2007, because of the level of the euro, which would reach 1.36 dollar in the second quarter, and the likelihood of a decline in the rate of the US Federal Reserve. An increase in the rate of the ECB coinciding with a decrease from the Fed would indeed leap the euro.

Sign of the perplexity caused yesterday by the President of the ECB's comments, the euro slightly fell against the dollar, settling in 1,3292 dollar in the evening against 1,3301 dollar the previous day, which was perhaps finally the desired effect.

Finally, as expected, the Bank of England left interest rates unchanged yesterday. It had identified them to 5, which corresponds to their highest level since September 2001, at its last meeting, in November. Sterling gave a little ground, settling in 1,9632 U.S. dollar against 1,9685 dollar the day before.