Euro falls on ECB expectations

01-13-2009 12:23

After opening with a quite large negative weekly distinction against the U.S. dollar and the Japanese yen the European currency dropped against these currencies. Traders believe that the European Central Bank will cut rates further this week.

The euro declined against the Japanese yen to the lowest month level and against the U.S. dollar to the lowest level since January 6. Analysts and Forex traders believe that on the next meeting (January 15) the ECB will decide to cut rate to the weakest level since 2005. Last Monday’s fall in the Asian equity indices also stimulates the yen to rise against the euro as carry trade investments decreased.

Some important macroeconomic reports from the major world economies will be published this week. Analysts believe that the reports will prove a decline of the global situation which will encourage the risk-aversion and will predictably support the yen and the dollar against the euro. The euro will possibly drop more than the recent market developments if the ECB rate cut will surpass 50 basis points.

EUR/ JPY fell from 121.12 to 120.43 (the weakest level since December 12), EUR/ USD declined from 1.3459 to 1.3361 (January 12, 9:54 GMT).