FOREX ALERTS >>
DailyFX Plus Login

eur fundamentals

Article

Euro Dives Amidst Evidence of Q3 Economic Contraction, ECB Rate Cuts
Saturday, 25 October 2008 00:29:35 GMT  |  Terri Belkas, Currency Strategist
Delicious
Facebook

The euro fell roughly 300 points during the European trading session to an intraday low of 1.2494 on Friday as data from the region was broadly disappointing.

In fact, the Purchasing Managers’ Index (PMI) for both the Euro-zone services and manufacturing sectors held below 50 for the fifth consecutive month, signaling a contraction in business activity and suggesting that the region will be one of the next to release negative Q3 GDP results. Furthermore, the composite index fell to the lowest level since record-keeping began in 1998. Keeping this in mind, Credit Suisse overnight index swaps are pricing in nearly 125bps worth of rate cuts by the European Central Bank over the next 12 months, and there is some speculation that the bank will enact a 25bp reduction as soon as next month. The potential for lower interest rates presents further downside risks for the euro, but with the Federal Reserve expected to cut US rates as soon as next week, EUR/USD could bounce higher in the near-term.

More Articles

Feedback Form