The Euro falls on more ECB rate cut news and members disagreement

The euro fell against the dollar and dropped against the yen as European Central Bank policy makers disagreed on the measures needed to combat the recession. The euro fell versus 10 of the 16 most-active currencies after ECB Executive Board member Lorenzo Bini Smaghi said the bank’s benchmark 1.25 percent interest rate is “very close” to its floor, Financial Times Deutschland reported. Two council members last week said they may support a rate under 1 percent. “Investors fear that European policy makers aren’t doing enough to safeguard the economy,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Any sign that the euro zone economy is deteriorating will likely add to the downward pressure on the euro.” The EUR/USD is currently trading at $1.3000 as of 8:30am, London Time.

Sterling slipped on Friday, pulling back against the dollar as the pound followed broad losses in the euro, while market participants awaited the UK budget due next week. The pound hit a session low after UK Trade and Investment Minister Mervyn Davies told Reuters he was not worried about a further slide in the currency, while adding a weak currency would help the British economy out of the recession. The UK government will present its budget to Parliament next Wednesday. It is widely expected to downgrade its economic outlook for the year, while boosting up government borrowing. "There has been a rise in risk aversion and sterling has reversed its gains," AIB Group Treasury economist in Dublin Geraldine Concagh said. The GBP/USD is currently trading at $1.4655 as of 8:45am, London Time.

The Australian and New Zealand dollars weakened on concern disagreements among European policy makers will worsen the global economic slump. “We were already seeing a weaker tone in the Aussie as it was due for some pullback after its recent rally,” said Amy Auster, head of foreign-exchange and international economics research at Australia & New Zealand Banking Group Ltd. in Melbourne. “The weaker-than-expected PPI underlines the fact that the RBA will need to cut rates again.” The RBA will release the minutes for its April policy meeting tomorrow while the statistics department will announce first-quarter inflation numbers on April 22. The AUD/USD is currently trading at 0.7135 as of 9:00am, London Time.

Today's Economic Events