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EUR is likely to strengthen. ...

The EUR advanced yesterday vs.10 of the 16 most-active currencies in the past 5 days after the ECB policy makers expressed concerns that inflation in the Euro zone may quicken. The ECB officials also indicated that there is no change in their hawkish stance on Interest Rates. Therefore the EUR is likely to strengthen.

The EUR also continues to benefit from the faulty condition of the USD. Besides the overwhelming strength and confidence being shown by the currency, the European economic forecast continues to release positive data. Yesterday's German Import Price Index printed at 0.8%, much higher than the forecasted 0.2%, while the British GDP remained stable at 0.6%

Analysts predict that the Fed will lower the Interest Rate target by at least another 0.5 percentage point at next month's FOMC meeting. Meanwhile, the EUR could test 1.52 -53 levels in the short-term. The Fed has already lowered its benchmark overnight lending rates by 2.25 percentage points to 3% since last September, while the ECB has kept its main rate at 4%. Given the rate difference between the Europe and the U.S., the EUR will stay high as long as the BOE will keep its Interest Rates unchanged.

Today, ECB President Trichet is expected to deliver a speech at 14:15 GMT in the Netherlands. As head of the central bank's governing body, which is responsible for setting the Euro zone's short term Interest Rate, his speeches can sometimes cause market volatility as traders react to clues regarding future monetary policy.

Today, the EUR is expected to trade around its current high levels, and if the U.S. fundamental data disappoints, the EUR might add another 100 pips.
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