ECB governing council member Guy Quaden said on Tuesday that he fully shared the views expressed by Mr Trichet, adding that there was no reason to confuse the monetary policy in the euro zone with that in the US. Analysts said however that Mr Trichets testimony to a European Parliament committee on Monday was not as dovish as some market participants had read it to be.
Its just a matter of emphasis. Even last week he was saying that rates were going to be augmented moderately, so there were clues there about how far rates were actually going to rise, Ian Gunner, head of foreign exchange research at Mellon Bank, said.
He was saying we should not automatically assume there would be a series of rate rises...he was talking quite matter-of-factly. In some ways his comments were not necessarily as dovish as the headlines suggested, he added.
Analysts said that the path of euro zone rates after an expected quarter percentage point boost on December 1, would depend on the durability of the euro zones fragile economic expansion.
Germanys Federal Statistics Office said earlier that gross domestic product (GDP) increased by 0.6% in Q3 of 2005 compared with the previous quarter, confirming an earlier estimate.
But with national holidays coming up in Japan on Wednesday and in the US on Thursday, trading was expected to thin. The euro stood at $1.1712 , down 0.13% on the day, while sterling fell to session lows against the dollar and the euro after German utility E.ON said it had ended takeover talks with Scottish Power. The dollar bought around 119.25 yen, up a quarter percent on the day. Overall, analysts said the dollar was excepted to stay on an upward path as the interest rate yield differential between Europe and the US was expected to widen.