The euro firmed today after the European Central Bank gave a clear hint that it is still on course to raise borrowing costs next month despite the recent turmoil in the financial markets.
In late European trading the European single currency was changing hands at €1.3537.
In a statement, the ECB confirmed that its monetary policy stance has not changed from earlier in the month when the bank's chief Jean-Claude Trichet reinforced expectations of another quarter point increase in the key interest refinancing rate to 4.25%.
Trichet's use of the codewords 'strong vigilance' on '2 August was widely seen as a precursor for a rate hike.
Since then, however, the troubles in the US subprime market have led to steep falls in markets around the world, and in turn leading to some doubt whether the ECB will continue hiking interest rates.
The ECB this afternoon said it had put another €40 billion into money markets in what it called 'a technical measure aimed at supporting the normalisation of the functioning of the euro money market'.
And traders expect the Fed to deliver a cut in American borrowing costs at its official meeting on 18 September. US rates currently stand at 5.25%.
The Fed's chairman Ben Bernanke said yesterday that he was 'absolutely' prepared to use all the tools at his disposal to address the credit crisis in the US financial system.'
Meanwhile, US and European stock markets moved higher today, spurred by hopes of an interest rate cut by the US Federal Reserve.
The Dow Jones and the Nasdaq were both up around 0.6% in late trading, while London's FTSE 100 added 1.5%, France's Cac put on 1.6% and Germany's Dax climbed 0.8% and the Dublin market closed up 1.5%.
