UK interest rates down to 5.5 pc, ECB stays on hold at 4pc
The euro made strong gains across the board after hawkish comments from European Central Bank chief Jean-Claude Trichet reinforced the idea that euro zone interest rates are likely to head higher still.
Following the ECB's decision to hold its key rate at 4.00 %, Trichet said in a press conference the central bank is ready to counter growing inflation risks. He also revealed that the governing council discussed the possibility of a rate hike at its meeting yesterday.
In parallel, the ECB raised its inflation forecasts and downgraded its growth predictions. Despite the prospect of lower growth, price pressure appear to remain the ECB's primary concern.
Elsewhere, the Pound recovered from losses incurred after the Bank of England cut interest rates.
The UK currency dropped to a 10-week low against the dollar and sank against the euro after the BoE lowered the cost of borrowing to 5.50 % from 5.75 %. It said the UK economy has begun to slow and inflation should be tempered by flagging demand.
Analysts said rates may have to fall as low as 4.00 % to avoid a brutal economic slowdown.
The Pound weakened steadily against the euro but gradually recovered from its steep fall against the dollar, helped somewhat by poor US jobs data. First-time claims for unemployment insurance rose to their highest in more than two years in the four weeks to Dec 1, with 338,000 new claims filed.
The data add to an increasing bulk of evidence that the US economy is heading for a sharp slowdown, and will fuel expectations for more rate cuts from the Federal Reserve in the months to come.
The Fed announces its next decision on borrowing costs on Tuesday and todays non-farm payrolls report for November will again be crucial for the market's expectations ahead of the meeting.
Wednesdays estimate from the ADP payrolls firm was for a rise of 189,000 in the November payrolls. This is more than twice the 65,000 increase analysts had forecast for the official non-farm payrolls figure today, although analysts point out the data is notoriously volatile.
Prices at the London open
GBPUSD – 2.0235
GBPEUR – 1.3856
EURUSD – 1.4599
GBPJPY – 225.11
GBPCHF – 2.2918
GBPAUD – 2.3075
GBPCAD – 2.0438
GBPZAR – 13.6011
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Following the ECB's decision to hold its key rate at 4.00 %, Trichet said in a press conference the central bank is ready to counter growing inflation risks. He also revealed that the governing council discussed the possibility of a rate hike at its meeting yesterday.
In parallel, the ECB raised its inflation forecasts and downgraded its growth predictions. Despite the prospect of lower growth, price pressure appear to remain the ECB's primary concern.
Elsewhere, the Pound recovered from losses incurred after the Bank of England cut interest rates.
The UK currency dropped to a 10-week low against the dollar and sank against the euro after the BoE lowered the cost of borrowing to 5.50 % from 5.75 %. It said the UK economy has begun to slow and inflation should be tempered by flagging demand.
Analysts said rates may have to fall as low as 4.00 % to avoid a brutal economic slowdown.
The Pound weakened steadily against the euro but gradually recovered from its steep fall against the dollar, helped somewhat by poor US jobs data. First-time claims for unemployment insurance rose to their highest in more than two years in the four weeks to Dec 1, with 338,000 new claims filed.
The data add to an increasing bulk of evidence that the US economy is heading for a sharp slowdown, and will fuel expectations for more rate cuts from the Federal Reserve in the months to come.
The Fed announces its next decision on borrowing costs on Tuesday and todays non-farm payrolls report for November will again be crucial for the market's expectations ahead of the meeting.
Wednesdays estimate from the ADP payrolls firm was for a rise of 189,000 in the November payrolls. This is more than twice the 65,000 increase analysts had forecast for the official non-farm payrolls figure today, although analysts point out the data is notoriously volatile.
Prices at the London open
GBPUSD – 2.0235
GBPEUR – 1.3856
EURUSD – 1.4599
GBPJPY – 225.11
GBPCHF – 2.2918
GBPAUD – 2.3075
GBPCAD – 2.0438
GBPZAR – 13.6011
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Labels: Bank of England, credit crunch, ECB, slowing economies
posted by Wise Money @ 8:47 AM
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