The European Central Bank (ECB) is expected to leave interest rates unchanged at the historic low rate of 0.75 per cent at its meeting on Thursday, despite the recent sharp rise in the value of the euro. Hope that the worst might be over for the eurozone's long-running debt crisis means that many analysts believe the ECB will not launch further emergency measures and will keep rates on hold until the middle of next year. Yet the euro's appreciation, combined with the region's renewed political uncertainty, has dampened the optimism the eurozone began the year with. A major focus of ECB President Mario Draghi's press conference following the meeting is also likely to be the scandal that has hit Italy's Monte dei Paschi di Siena Bank and questions about what Draghi knew about the bank's derivative trading. The scandal at Italy's third biggest bank dates back to the time when Draghi headed Italy's central bank between 2006 to 2011. Expectations that Monte Paschi ran up millions of euros worth of loses from derivatives has sparked a major political row in Italy just as the nation heads towards elections this month. The drama surrounding Monte Paschi and its impact on Italy's election campaign - polls are pointing to unpredictable results - have served to highlight investors' concerns about renewed political uncertainty in the eurozone. Meanwhile, Spanish Prime Minister Mariano Rajoy is embroiled in a growing corruption scandal involving his ruling People's Party. The result has been a pickup in borrowing costs for both Italy and Spain. The uncertainty comes as the euro's climb to its highest level in more than year on Friday has led to worries that the stronger currency could undercut the eurozone's exports and consequently delay the region's recovery from recession. Underscoring concerns about the strength of the euro, French President Francois Hollande called on Tuesday for an exchange rate policy to shield the currency from "irrational movements."
