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The Euro falls as speculation mounts that the ECB will cut rates to easy the eco

Thu, May 7 2009, 10:08 GMT
by Benny Menashe

Finotec Group Inc.  |  View company's profile

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The euro slid against the dollar on speculation European Central Bank policy makers will lower interest rates today and consider other measures such as buying debt to stimulate growth. “Some people expect a dramatic move by the ECB, such as a big purchase of bonds,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo. That “is why the euro is suffering.” The ECB will reduce borrowing costs by a quarter-percentage point to 1 percent today, according to all economists surveyed by Bloomberg. Europe’s single-currency may be set for a sudden slide if the ECB announces plans to buy debt at today’s policy meeting, Citigroup Inc. said. The U.S. dollar dropped after the Federal Reserve announced March 18 it would start buying Treasuries to hold down consumer borrowing costs. The EUR/USD is currently trading at $1.3265 as of 9:45am, London Time.

Sterling reversed course to hit session highs against the dollar and euro on Wednesday after stronger-than-forecast UK service sector data eclipsed earlier concerns about U.S. banks and boosted investor risk appetite. This stoked the belief that the UK economy is moving toward recovery from the depths of recession the rise in the headline services index was the biggest in a decade, even though the sector continued to contract. The data boosted sentiment toward sterling and risk appetite in general. Both had been dented earlier in the day by a report that Bank of America, the largest U.S. bank, needs up to $34 billion in additional capital. The GBP/USD is currently trading at $1.5090 as of 8:50am, London Time.

The yen fell against other major currencies on Thursday as risk aversion lessened on improving clarity about the health of the financial system amid a flurry of news ahead of results of U.S. bank stress tests. The Australian dollar hit its highest in seven months against the dollar and the yen after data showed Australian employment jumped against all expectations in April, pulling the jobless rate down and throwing into doubt the need for further interest rate cuts. U.S. Treasury Secretary Timothy Geithner said on Wednesday that none of the 19 banks being examined under stress tests are at risk of insolvency. The AUD/USD is currently trading at 0.7545 as of 9:10am, London Time.

Today's Economic Events

Published on  Thu, May 7 2009, 10:11 GMT

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