The euro has remained broadly stable as financial markets wait for an announcement this evening on whether US interest rates will rise immediately.
As well as the US Federal Reserve, the Bank of England and the European Central Bank are meeting this week, amid expectations that they too will discuss pushing up borrowing costs.
According to Mr Oliver Mangan, bond economist at AIB, interest rates in all three areas will be higher by the end of November, if not this week. "We may not get the rises this week, but the worm has turned and [we are] probably looking at rises in late October or November," he said.
US economic activity has accelerated again since June. However, the stock market is 10 per cent off its high and core inflation is below 2 per cent, its lowest in decades if oil is excluded.
Mr Mangan added that the chairman of the Federal Reserve, Mr Alan Greenspan, who usually gives a signal, has so far remained silent . "But we will have a rise before the year is out," he added.
At the same time, ECB officials have changed their tune over the past week. The ECB's chief economist, Mr Otmar Issing, and the French vice-president, Mr Christian Noyer, want a rate rise. Last week, both warned about the dangers of rising price pressures and said the bank would prefer to act in time to curb such developments.
The Germans still appear to believe that rate rises would be best postponed until economic recovery in Germany is more firmly established, however. On balance, Mr Mangan says, the ECB will delay rate rises until the end of this month or the beginning of November.
A UK rate rise is also possible this week, although the strength of sterling may argue against it somewhat. The outlook for inflation there is also looking quite positive given the supermarket price war in reaction to Wal-Mart's arrival.
The euro closed at $1.0711, from $1.0714 on Friday, and at 64.68p against sterling, from 64.73p. As a result, the pound closed at 82.12p against sterling, from 82.19p.
According to Mr Mangan, the euro has now reached its low point and is on a long-term upward trend. He added that he expects it to end the year at $1.12.
