FX.co ★ Fundamental market review for April 5, 2011

The euro slightly weakened against the US currency. Today’s low of EUR/USD pair is 1.4168 with high being 1.4232. On Tuesday the euro has been mixing below its high versus the US dollar, as investors are pondering over the possibility of the unified currency to grow again with hopes for the key interest rate rise being already reflected in prices.
The European Central bank is expected to raise its rate by ¼ of a percent point up from the current 1% at Thursday meeting and then two times more until the end of the year. «For the ECB, an April interest rate hike is a done deal and one or two more hikes are priced in ... It's hard to see a positive surprise from here », said Masafumi Yamamoto, chief FX strategist at Barclays. «Still, the euro zone would be the first to raise interest rates, which supports the euro. Expectations for diversification flows from higher oil prices are also positive. There is also a risk that the Fed minutes may show a hawkish tone». According to most market participants, the euro is likely to drop in case interest rates are increased or in case investors consider any interest rate grow to be sporadic.
Today what investors are looking forward to is macroeconomic statistics on the US retail sales index and Fed interest rate announcement to be published.