Wednesday during early deals, the euro weakened against its most major counterparts and declined to a 2-day low versus the pound as markets awaited interest rate decisions in Europe tomorrow. The European central bank is expected to hold the rate by 2% but the Bank of England is widely predicted to chop rates by 50 basis points to 1.00%.
In economic news, Euro-zone retail sales was stable in December on a monthly basis, the Eurostat said today. Economists had expected a 0.2% fall for December. This follows a 0.1% decline in November, revised down from a 0.6% increase initially reported.
The French statistical office INSEE said today that producer prices remained flat in December from the previous year, while economists were looking for an annual increase of 0.3%. On a monthly basis, producer prices were down 1.4% in December compared to a 1.1% fall expected by economists.
The euro started ticking down against the yen and the US dollar by about 1:35 am ET Wednesday. The euro is now trading at 1.2924 against the dollar and 115.19 against the yen, moving down from a 6-day high of 1.3072 and 117.05, respectively. The European currency closed Tuesday's deals at 1.3041 against the dollar and 116.64 against the yen.
By about 4:35 am ET, the euro-pound pair dropped to a 2-day low of 0.8971. This may be compared to Tuesday's closing value of 0.9021. On the downside, the euro may likely find support near the 0.880 level.
UK consumer morale deteriorated to a record low in January as growing concerns about economy and job losses affected assessment of present and future economic situation, results of a survey conducted by the Nationwide Building Society revealed today.
Further a report by the National Institute of Economic and Social Research or NIESR said the British economy will shrink 2.7% this year, the sharpest contraction in 60 years. The think-tank lowered GDP forecast for 2009 from a 0.9% decline estimated in October. The economy is expected to record a slight recovery in 2010 by expanding 0.6%.
The NIESR expects the central bank to cut key interest rate again from a record low of 1.5% on Thursday.
On the other hand, the euro climbed against the Swiss franc during this time period, due to across the board weakening of the latter. The single currency climbed to as high as 1.4941 against the franc, compared to 1.4904 hit late yesterday in New York.
