ECB Likely To Hold While Fed May Cut Further

Posted by Rob

April 8, 2008

With the US interest rate presently at two and a quarter percent, and the ECB likely to keep interest rates set at 4 percent, we have seen a one week high against the dollar.

It is likely the Federal Reserve will cut interest rates further in the coming days, this has led to trading in favour of the Euro.

According to Henrik Gullberg, a currency strategist at Calyon, investment-bank arm of Credit Agricole SA, speaking of the ECB “They definitely won’t be dovish and that has weighed on chances of seeing a rate cut at some point. The euro may rise to $1.60 by the end of the quarter.” - Bloomberg
Meanwhile the British Pound fell to within half a cent of a record low against the Euro on speculation of an interest rate cut by the BoE on April 10th. The GBP fell against all major currencies after data showed a fall in decline in house prices. Both the ECB and BoE are expected to make interest rate decisions on April 10th.

With the speculation traders will be looking to a further decline for the USD if the Fed drop the interest rate, as well as a decline for GBP if the interest rate is cut by the BoE. Traders may look to buy EURUSD after the data announcements.

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