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Euro Ends Year Down Slightly Against US Dollar as EUR/GBP Dictates Price Action
Wednesday, 31 December 2008 21:04:55 GMT  |  Terri Belkas, Currency Strategist
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In the final days of 2008, EUR/GBP traded at record highs to target parity, as the markets anticipated that the European Central Bank would be far slower to cut interest rates than the Bank of England.

The plunge in the British pound against the euro has resonated throughout the forex markets, as evidenced by the end-of-year stats. In fact, the euro only lost about 4.3 percent against the US dollar during 2008, while the British pound plummeted 26.5 percent. Both currencies started to fall sharply in July, but emerging weakness in the US dollar following the Fed’s surprisingly aggressive rate cut in December did not translate into GBP/USD strength, unlike the EUR/USD, which recouped roughly half its losses from mid-year. Going into 2009, it will be interesting to see if a pick up in liquidity will lead US dollar trends to become dominant once again, or if the choppy ascent of EUR/GBP will remain in the driver’s seat until the pair hits parity. This is something that will be reassessed on Friday.

Related Articles: Euro/US Dollar Exchange Rate Forecast, British Pound/US Dollar Exchange Rate Forecast

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