Dollar slips as expectations for interest rate cut

The dollar slipped yesterday as worries about the struggling U.S. housing sector and continuous credit problems weighed on sentiment, leaving the dollar's long-term downtrend intact.” the market expectation is to see the Euro/Dollar at 1.4800 until the end of the year”, said from Finotec dealing desk. The Dollar is trading around the levels of 1.4645 against the Euro, around the levels of 111.45 against the Yen and around the levels of 2.0540 against the sterling.

Data showing U.S. retail sales growth slowed slightly in October, in line with expectations, and flat producer prices supported dealers' decisions to keep pushing the dollar toward record lows against the euro. "Retail and sales and PPI support the view that growth is slowing, also cause to a selling pressure on the US currency”, said from Finotec dealing desk.

Interest-rate futures traded on the Chicago Board of Trade show 72 percent odds the Federal Reserve will cut the target rate for overnight lending between banks a quarter-percentage point to 4.25 percent on Dec. 11, down from 74 percent before the data was released. The Fed has cut the rate 0.75 percentage point since Sept. 18, when the central bank lowered borrowing costs for the first time since 2003.

The Euro rose 0.4 percent to $1.4656, within sight of record highs of $1.4752 reached last week. Against the Swiss franc, the dollar fell to the lowest level since April 1995, at 1.1178 francs before recovering to trade at 1.1244, still down 0.2 percent on the day. A report earlier yesterday showed Euro zone economic growth rebounded more than expected in the third quarter, but economists expected a slowdown in the current quarter would keep the European Central Bank on hold.

The British pound touched 71.36 pence per Euro, the lowest since 2003, after the central bank said in its quarterly inflation report that risks to price growth are ``balanced,'' provided it lowers rates a quarter-point to 5.5 percent next year. U.K. central bank Governor Mervyn King said the bank's “central projection is for growth to slow sharply'' in 2008. “There's increase demand for Euro-sterling,'' said from Finotec team. Immediately after the statement the sterling drops down sharply against the dollar from 2.0800 to the levels of 2.0550.”Forex players are still asking to sell the sterling, it seems that the pair is targeting to 2.0350”, added.

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