ECB warns of inflation as euro stregthens

Story link: ECB warns of inflation as euro stregthens

The euro gained 1.1 percent to $1.2200 in relation to the US dollar on Tuesday, for a two-day gain of 1.9 percent.

This put the dollar at a three-week low against the euro. Some analysts saw the dollar’s decline as a correction rather than a sign of new weakness in the US currency, but news positive to the euro also played into the shared currency’s gains.

One member of the European Central Bank’s governing council was quoted as saying that rising oil prices could force the ECB to raise its inflation forecast, lessening the chances that eurozone interest rates would be cut in the near future.

In addition, the Organization for Economic Co-operation and Development said that the ECB could reasonably hold interest rates at present levels as long as the outlook on inflation stays consistent with price stability in the medium term.

The OECD had recommended that the ECB cut eurozone interest rates by 50 basis points less than two months ago. Besides falling in relation to the euro, the US dollar also lost value against the yen, sterling, and the South African rand.

The dollar slipped 0.7 percent in relation to the yen to ¥110.95, fell 0.9 percent to $1.7736 against sterling, and lost 3 percent to the South African rand. The rand has gained 4.9 percent on the US dollar in the past two days.