Markets adjust euro + dollar rate expectations

Bond markets had a rocky time towards the end of last week as expectations altered of rate rises in different markets.

On Friday US jobs data showed stronger than expected employment growth, and therefore pointed to another rate increase for the dollar.

Some 211,000 new jobs were added to the payroll in March.

Meanwhile on Thursday, comments by the European Central Bank governor Jean-Claude Trichet led markets to revise forecasts back to an interest rate rise in June, after strong sentiment data had raised expectations of a rate rise as early as May.

Both sets of news sent the dollar rising to EUR 1.2092 per USD late on Thursday from 1.2333 the day before.

The ECB kept the main rate on refinancing operations unchanged at 2.50% on Thursday, which was expected, but surprised markets by the fact that Trichet studiously avoided using the word “vigilance”.

The Central Bank of Cyprus also kept interest rates unchanged on Friday at 75 basis points above euro-area equivalents.