The Euro falls on speculation that the ECB will cut rates this month

The euro fell against the dollar and the yen on speculation the European Central Bank is more likely to cut interest rates to a record to counter a deepening recession, diminishing the allure of asset. The euro slid versus 13 of the 16 most-active currencies after the European Commission yesterday said the euro-area economy will shrink 4 percent this year, twice the contraction projected three months ago. “We saw the European governments downgrade their growth forecasts,” said Amy Auster at Australia & New Zealand Banking Group Ltd. “The ECB will end up still cutting interest rates and probably undertaking some more unorthodox measures. We’ve got a weak outlook for the euro.” The EUR/USD is currently trading at $1.3325 as of 8:45am, London Time.

Sterling rose against a broadly weaker yen on Friday and popped above $1.49 in the wake of data showing the pace of deterioration in UK manufacturing slowed in April. The CIPS/Markit manufacturing purchasing managers' index improved to 42.9 in April from an upwardly revised 39.5 in March, although it remained below the 50 level that separates expansion from contraction. Other data on Friday showed mortgage lending grew at less than half the rate expected in March and there was little sign the extra cash being pumped into the system by the Bank of England was reaching households and businesses. The GBP/USD is currently trading at $1.5040 as of 9:10am, London Time.

The U.S. dollar extended its losses on Tuesday, as a resurgence in risk appetite saw investors dump safe-haven assets and pile in to riskier trades like stocks, commodities and higher-yielding currencies. The dollar lost ground broadly against major currencies, with its index .DXY languishing at five-week lows, as easing concerns over U.S. banks and hopes the worst in the global economy may have passed stoked a rally in stocks. On Monday, investors cheered a 3.2 percent jump in pending U.S. home sales in March and the first increase in construction spending since September. The USD/JPY is currently trading at 99.00 as of 9:20am, London Time.

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