The euro only ended the day slightly higher against the US dollar on Tuesday despite a surge at the start of the New York trading session up to 1.2800, as comments by European Central Bank Governing Council member Axel Weber reiterated the sentiment of ECB President Jean-Claude Trichet’s March 5 press conference and weighed on the currency. Weber said that the “bottom line” for the ECB’s main refinancing rate “should fall at 1 percent,” and went on to see that he had a “problem” with cutting the deposit rate to zero and would “prefer to leave it at 0.5 percent.” Meanwhile, ECB Executive Board member Lorenzo Bini Smaghi said that they were ready to lower interest rates to zero if economic conditions in the Euro-zone worsen and “if deflation becomes a threat.” In the end, these comments add to evidence that the ECB is open to cutting the main refinancing rate down to 1.00 percent or even 0.50 percent in coming months, but says little about what the central bank will do during its next meeting on April 2. As we’ve said repeatedly in recent days, this leaves potential open for further declines in the euro against the greenback, but because of the UK’s quantitative easing efforts, upside risks remains for the euro against the British pound.
Related Article: Euro Weekly Trading Forecast
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