Inflation Pressure Makes Euro Stronger

The euro advanced on the speculation that the accelerating inflation will make the European Central Bank to raise the interest rates before the Federal Reserve.

The Eurozone annual inflation rose to 2.3 percent in January from 2.2 percent in December 2010. The consumer prices remained above the ECB target of 2 percent for the second month. The rising consumer prices spurred the speculation that the inflation pressure will prompt the ECB to increase the rates. Most analysts, though, don’t think that this will happen on the meeting of the ECB policy maker this week.

As for the Federal Reserve, analysts think that the Fed will stick to its stimulus program. Slower consumer spending and pending home sales support the opinion that the US economy is still too weak to survive without the stimulus.

EUR/USD rose from 1.3805 to 1.3808 today as of 3:48 GMT. The currency pair reach 1.3855 yesterday, the highest level since February 2. EUR/JPY jumped from 112.89 to 113.34 after it advanced on the previous trading session from 112.21 to 112.90.

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