Some traders are betting on lower rates

The European Central Bank, meeting on Thursday, is likely to resist calls to fight slow growth with a rate cut.

But the euro's rise in recent months against a flagging dollar has halted in the hope of improving US economic data.

And all eyes are on ECB President Jean-Claude Trichet's comments, to watch for signs of movement to come.

Back from the brink

Among those pushing for the ECB to move quickly is German Chancellor Gerhard Schroeder, who barely a week ago said the high euro was "not satisfactory" and was blighting Europe's economic prospects.

In February the currency hit a level of close to $1.30, 50% up on its October 2000 low.

But the prospect of some good news about US jobs later this week is helping catalyse investors to buy dollars.

Early on Thursday in Asia the euro was trading at little more than $1.21.

"The weak dollar trend has been reversed," said Yoshiharu Yanagisawa of State Street in Tokyo.

"I think the dollar will still be bought even if the ECB keeps rates unchanged, on speculation that they will cut next time."

Up or down?

But the ECB has demonstrated that it is reluctant to cut rates even in the face of the flagging European economy.

It may not be moved even by its own recent downgrading of 2003 growth - now forecast at 0.2-0.6%, down from the previous 0.4-1%.

And it has sent signals in the past that even if Europe hangs behind the rest of the world, the likelihood of a global recovery is so strong as to mean the euro's gain is not something to which it needs to respond.

Therefore, much attention will be paid to Mr Trichet's comments at Thursday afternoon's news conference, to see whether he gives any clues about the ECB's thinking.

The key word is "appropriate", his customary description of the rate level since his appointment last year.

If he does not use it, speculation about a cut could run riot.