Euro, pound weaken on rate cuts

Euro, pound weaken on rate cuts

Story link: Euro, pound weaken on rate cuts

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The euro and the pound were both weaker Thursday after both the European Central Bank and the Bank of England cut interest rates to historic lows.

The ECB lowered Eurozone interest rates to 1.5 percent, a cut of 0.5 percent, while the Bank of England’s Monetary Policy Committee also cut rates by half a percentage point to 0.5 percent, leaving it very little room for more easing.

Both rate cuts were expected.

The euro was also hurt by a revised ECB forecast after it said it believes the Eurozone economy will contract by at least 2.2 percent and possibly by as much as 3.2 percent this year, and that while the region’s economy could grow by 0.7 percent in 2010 it could also contract by that much.

Meanwhile, the Japanese yen strengthened on declines in equities markets which restored some of that currency’s safe haven status.

In late morning trade in New York the US dollar traded at $1.253 to the euro and at $1.4075 to the pound while the yen traded at ¥123.274 to the euro, at ¥138.4729 to the pound and at ¥98.385 to the greenback.

The pound was down to 89.02p to the euro.