JEAN-CLAUDE TRICHET, President of the European Central Bank, delivered an upbeat assessment of prospects for Europe’s economic revival, dealing a blow to lingering hopes for another cut in eurozone interest rates.

A day after the Federal Reserve startled markets with a key shift in stance which saw it drop its pledge that US rates will remain low “for a considerable period”, M Trichet’s comments left analysts concluding that the next move in eurozone rates will be upwards.

“The prospects for 2004 of growth improving progressively up to potential and inflation being in line with price stability looks, obviously, good,” the ECB President said in Madrid.

He said that manufacturing and confidence data were consistent with a recovery in Europe’s economic activity.

Jonathan Hoffman, European economist at RBS Financial Markets, said that M Trichet’s remarks dealt a blow to speculation that the impending meeting in Florida of the finance ministers from the Group of Seven (G7) leading economies would lead to concerted action to underpin the dollar and stem the euro’s rise.

Eurozone government bonds suffered a heavy sell-off in the wake of the ECB President’s speech sending their yields to three-week highs.

Fallout from the Fed’s statement on Wednesday continued the rally in the dollar yesterday. The US currency gained another 1 per cent in value against the euro, which fell to levels below $1.24.