Euro Weakens on Rate Cuts Speculations

After consecutive days rallying against the dollar and the yen, the euro fell on speculations that the European Central Bank will cut its interest rates to stop the deepening recession to cause more damages in the bloc’s economy.
The European Commission declared yesterday that the Eurozone economy will contract around 4 percent this year, a more pessimistic forecast than previous ones, which caused the euro to slid against all major currencies. The  U. S. dollar had a day of gains after positive financial speculations from the Wall Street Journal, increasing demand for the currency. The deepening recession in Europe has been a major concern for the ECB, which is facing the worst economic crisis since the Second World War, and rates are expected to hit more record lows, as the economy is not showing solid signs of recovery.
Analysts said that at every report, most of the European countries downgrade their growth expectations, and countries that were a model of economic success such as Ireland, are forecast to contract more than 10 percent in 2009, influencing heavily on ECB policy makers’ decisions, which have set the lowest interest rates since the creation of the euro. A part from the rate cuts, other measures are expected to be taken as the recession deepens, pushing investors away from the euro.
The EUR/USD rose in the intraday from 1.3290 to 1.3374 but is entering a downtrend. The EUR/AUD fell from 1.8022 to 1.7968.

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