The euro hit record highs around $1.5350 on Thursday on expectations the European Central Bank won't be ready to cut interest rates for a while yet and once it starts won't be as aggressive as the Federal Reserve. The ECB left rates at 4 percent as expected earlier on Thursday, with the focus turning to president Jean-Claude Trichet's news conference at 1330 GMT.
Some analysts reckon Trichet could start paving the way for future easing by giving more weight to slowing growth than to rising price pressures, but others reckon still robust euro zone data and ongoing price pressures will keep his tone more balanced.
"They've had some robust news from the surveys - the Ifo was very strong in Germany and the PMIs from the service sector have been solid as well," said Peter Frank, currency strategist at Societe Generale.
"So even though there's pockets of weakness ... it's a bit tricky for Trichet to pick this month to go dovish and that's why the FX market is taking euro/dollar higher."
Even if Trichet does turn more dovish, yield spreads will remain firmly in favour of the euro given expectations of at least 50 basis points worth of Fed cuts this month from the current 3 percent. The euro showed little reaction to the ECB's on hold decision, holding near an earlier record high of $1.5349.
With the euro surging through the psychologically key $1.50 mark for the first time last week, investors will also be looking to see whether Trichet comments on currencies. "Our guess is that for the time being they would accept the exchange rate and certainly we are not at levels that would force any intervention by the ECB," said Tom Vosa, head of market economics nabCapital.
Central banks in Britain and New Zealand also left policy on hold on Thursday. Sterling eased from an earlier record low versus the euro and hit the year's high against the dollar in a relief rally as markets had priced in a small chance of a cut from the current 5.25 percent.
The kiwi was supported after the Reserve Bank of New Zealand said inflationary pressures remained persistent. The benchmark rate there is 8.25 percent. The US dollar struck an all-time low against a trade-weighted basket of major currencies at 73.107. It also fell half a percent to 103.47 yen but held above a three-year low of 102.59 yen hit on Monday, according to Reuters data.
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