Bank of England, European Central Bank cut interest rates. Euro gains in Forex Trading. | CountingPips Forex Blog

December 4, 2008 - Forex Economic News

Bank of England, European Central Bank cut interest rates. Euro gains in Forex Trading.

The Bank of England announced the decision to cut its interest rate by 100 basis points today to bring the official bank rate to 2.00 percent from 3.00 percent, its lowest level in over fifty years. This 100 point rate reduction was expected by market forecasts and follows a reduction of 150 basis points in November which was the largest BOE cut in 27 years. The BOE, ECB cut rates, pound, euro, forex trading BOE has now reduced its interest rate by 300 basis points since October 8th when major central banks around the globe coordinated rate cuts to ease pressures of the credit crisis and plunging stock markets.

The BOE statement on the rate cut commented on the U.K economy, "business surveys have weakened further and suggest that the downturn has gathered pace. Consumer spending and business investment have stalled, while residential investment has continued to fall. Activity indicators in the rest of the world have also weakened, though the further depreciation in sterling should moderate the impact of weaker global growth on the United Kingdom."

Meanwhile, the European Central Bank also reduced its interest rate today by 75 basis points from 3.25 percent to 2.50 percent. This rate reduction was more than expected by market forecasts as expectations were for a 50 basis point cut. The ECB had last reduced its rate by 50 basis points on November 6th and by 50 basis points on October 8th.

Jean-Claude Trichet, the President of the ECB, commented in his press conference today that "Since September, there has been an intensification and broadening of the financial market turmoil. Tensions have increasingly spilled over from the financial sector to the real economy, and the world economy as a whole is feeling their adverse effects. In the euro area, a number of the downside risks to economic activity that were identified previously have materialised, leading in the third quarter to a contraction of 0.2% in real GDP growth".

Trichet said that the ECB has revised down its GDP growth outlook for the next couple of years. The GDP growth projections are for "between -1.0% and 0.0% for 2009, and between 0.5% and 1.5% for 2010" after growth of roughly 1.0 percent for 2008 according to Eurosystem staff predictions. The bank expects inflation to keep decreasing also with projections of "between 1.1% and 1.7% for 2009" and "between 1.5% and 2.1%" in 2010.

Euro gains verses Dollar and Yen in Forex Trading.

The euro has gained today in forex trading against the U.S. dollar and Japanese yen while the pound has been paring early losses from this morning. The EUR/USD has gained over approximately 200 pips as the pair trades at 1.2796 today before noon in the US trading session at 11:22am ET. The EUR/USD opened trading today at approximately 1.2674 and has advanced to its highest exchange rate verses the dollar since November 28th. The EUR/JPY has also advanced today almost 100 pips as the EUR/JPY trades at 118.97 from 117.98. The euro has also seen gains today verses the Swiss franc, Canadian dollar and British pound while falling verses the Australian dollar.

The British pound has climbed back against the U.S. dollar and Japanese yen today after falling earlier today. The GBP/USD has gained by approximately 50 pips to trading at 1.4765 after opening at 1.4726. The GBP/USD traded as low as 1.4467 earlier today. Against the Japanese yen, the pound is trading at 137.26 after opening today at 137.10. The GBP/JPY has pared its early losses as the pair traded as low as 134.10 earlier this morning. Against the euro, the pound has lost ground by approximately 60 pips today as the EUR/GBP pair trades at 0.8666.

EUR/USD Chart - The Euro advancing vs. the US dollar in forex trading today despite the ECB reducing its interest rate by a more than expected 75 basis points(Hourly Chart).

Today's Forex Chart

tags: interest rates, gbp, eur, euro, pound, ecb, boe, economy

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