Euro-US dollar dominated by outlook for interest rates

10/16/06 - ING Financial Markets

LONDON, October 16 (newratings.com) – Analyst Tom Levinson of ING Financial Markets expects the interest rate differentials between the US and the EU region to be as low as 50bps by mid-2007, which would boost the euro-US dollar exchange rate above the 1.30 mark.

In a research note published this morning, the analyst mentions that there is likely to be a rally in the euro-US dollar exchange rate in the near term. The analyst expects the eurozone economy to enter 2007 with adequate momentum to justify an additional 25bps hike in the European Central Bank’s interest rates to 3.75%. The recent rise in rate differentials between the interest rates in Europe and the US is likely to have supported the US dollar in the recent past, according to ING Financial Markets.