The euro fell against the dollar, the yen and the pound after
European Central Bank President Jean- Claude Trichet said the economy
``weakened significantly'' and the International Monetary Fund cut
growth forecasts for the region.
The European single currency slid the most this week versus the dollar
as the ECB reduced its main interest rate by 50 basis points to 3.25
percent today, in line with a Bloomberg survey of economists, and
Trichet said more cuts may follow. The Bank of England unexpectedly
lowered its key rate by 150 basis points to 3 percent. Switzerland also
cut borrowing costs.
``The market is disappointed with the ECB after the Bank of England's
bigger-than-expected cut earlier today,'' said Daragh Maher, deputy
head of global currency strategy in London at Calyon, the
investment-banking arm of France's Credit Agricole SA. ``The ECB looks
like it's behind the curve and the euro is being marked down on the
back of that.''
``The intensification and broadening of the financial turmoil is likely
to dampen global and euro-area demand for a rather protracted period of
time,'' Trichet said today at a press conference in Frankfurt after the
ECB meeting. ``In such an environment, price, cost and wage pressures
should also moderate.''
Trichet said the ECB's rate-setting Governing Council discussed a 75 basis-point reduction.
Economists predict the ECB will continue to cut borrowing costs at the
most aggressive pace in its 10-year history, taking its key rate to 2.5
percent by April as growth falters. All Group of Seven economies except
Canada will contract next year, the IMF said today in an update to its
World Economic Outlook report. China's economy will also shrink, the
IMF said.
The Bank of England, led by Governor Mervyn King, reduced its key rate
by the most in 16 years as the seizure in credit markets left Britain
on the edge of its first recession since 1991. Signs the economy is
faltering prompted a 50 billion-pound ($80 billion) bank rescue package
from the government. The nation's main rate hasn't been lower since
1955.
Gains by the dollar may be limited before economic data tomorrow. U.S.
payrolls fell by 200,000 last month and the unemployment rate rose to a
five-year high of 6.3 percent, according to the median forecast of 75
economists surveyed by Bloomberg. The U.S. economy contracted 0.3
percent in the third quarter, the biggest decline since 2001.
European data for Friday starts at 0700GMT with the German trade
balance for September, followed st 0745GMT by the French central
government deficit and merchandise trade balance, also for September.
UK data at 0930GMT sees personal insolvency and possession data, while
the final main European data release for the week is German industrial
output data, which is forecast at -0.5% m/m, -1.7% y/y. The main event
for Friday comes at 1330GMT with the US labour market data, where non-farm payrolls
are forecast to fall 200,000 in. October, continuing the downward
trend. The unemployment rate is expected to rise to 6.3% after holding
at 6.1% in September. Hourly
earnings are expected to rise 0.2% in October, while the average
workweek is forecast to stay at 33.6 hours. US data continues at
1500GMT with wholesale inventories for September and the NAR Pending
Home Sales for September.