Expectations continue on euro interest rate cut

Story link: Expectations continue on euro interest rate cut

In world currencies on Thursday, the euro was down again against the US dollar and sterling, while sterling and the yen lost ground against the US dollar.

Sterling did gain in relation to the euro, rising 0.4 percent to £0.6629. The British currency lost 0.2 percent to $1.8181 in relation to the US dollar.

Sterling’s problems were related to a report released by the Confederation of British Industry that showed industrial orders down to their lowest level in almost two years even as inventories were high.

Several factors have contributed to this situation. Demand is low in the eurozone and the UK, commodities prices for everything from oil to metals are high, and international competition for business is strong.

The euro’s problems, meanwhile, can be traced at least partly to continuing speculation about what will happen to eurozone interest rates. This speculation was fueled by Tuesday’s move by Riksbank to lower interest rates in Sweden and the release of Bank of England meeting minutes that revealed that two monetary policy committee members argued for a lowering of interest rates in the UK.

Declarations from European Central Bank officials that current rates are not interfering with investment and that calls for rate cuts are “unhelpful” have done little to deter the rumors.

Under these circumstances, the euro declined by 0.7 percent to $1.2047 in relation to the US dollar.

The yen was also weaker against the US dollar as it lost 0.2 percent to ¥108.88.