Euro weakens on rate cut evidence

by Dave Keating | January 6, 2009 at 04:00 am

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The euro dipped against the dollar and the pound today as currency speculators reacted to an anticipated rate cut by the European Central Bank on january 15. However it is unclear whether the fall is likely to increase, because the UK is expected to cut rates shortly, and the US interest rate is effectively 0. Also, currency speculators have perceived the eurozone to be better equiped to withstand the global economic turmoil than the Uk or the US.

Eurozone inflation figures showed a bigger-than-expected drop while the purchasing managers' index showed a contraction in the service sector.

The pound is trading at 1.09530 euros while the dollar is at 0.74765 euros.

The ECB has cut rates from 4.25% to 2.5% since October, as inflation has dropped from its July peak of 4%.