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Euro Maintains Wide Ranges as Euro-zone Data Suggest ECB Will Cut Rates on January 15
Tuesday, 30 December 2008 21:38:21 GMT  |  Terri Belkas, Currency Strategist
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The euro traded within a 200 point range versus the US dollar on Tuesday, ending the day up 1 percent from yesterday despite a slow decline throughout the US trading session. Meanwhile, the euro touched a fresh record high against the British pound for the third day in a row, adding to speculation that the currencies will reach parity within the next few weeks. The moves came despite generally disappointing European data, as the Purchasing Managers’ Index (PMI) for the Euro-zone retail sector edged slightly higher, but still remained below 50 - signaling a contraction in business activity - for the seventh straight month. Meanwhile, M3 money supply for the region slowed to a 7.8 percent annual pace in November, which was the lowest since January 2006, signaling that inflation pressures are cooling as loans to the private sector slowed to 7.1 percent from 7.8 percent, highlighting the extent of the credit crunch. Overall, the data suggests that the European Central Bank will indeed cut rates by 50 basis points or more when they meet on January 15, and this sentiment could drive the euro back down toward yesterday’s low of 1.3916.

Related Article: Euro/US Dollar Exchange Rate Forecast


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