Bank of England, ECB holds interest rates steady. Euro, Pound fall in Currency Trading. | CountingPips Forex Blog

September 4, 2008 - Forex Economic News

Bank of England, ECB holds interest rates steady. Euro, Pound fall in Currency Trading.

News out of Europe today focused on the Bank of England and the European Central Bank interest rate decisions. The BOE decided to leave its interest rate unchanged at 5.00 percent as expected. The BOE had last altered their interest rate by reducing the rate from 5.25 percent to 5.00 percent in April. The BOE did not release a statement with their rate announcement and the minutes of the monetary policy meeting will released on the 17th of September.

Euro, Pound fall in Currency Trading. The European Central Bank also left its interest rate steady at 4.25 percent and in line with the forecasted market expectations after raising the rate by 25 basis points in July. The ECB left its interest rate unchanged this month as the Eurozone economy faces continued high inflation rates and a contraction in economic growth in the second quarter.

Jean-Claude Trichet, the President of the ECB, spoke on the Euro economy in his press statement today, "Taking into account all available information, the euro area economy is currently experiencing an episode of weak activity characterised by high commodity prices weighing on consumer confidence and demand, as well as by dampened investment growth. We expect this episode to be followed by a gradual recovery. In particular, if persistent, the fall in oil prices from their peak in July will help strengthen real disposable income, with the level of employment remaining high and the unemployment rate low by historical standards. Moreover, growth in the world economy is expected to remain relatively resilient, benefiting mainly from sustained growth in emerging economies. This should support external demand for euro area goods and services and thereby investment."

Trichet also stated that with a weakening economy, the ECB estimates for GDP growth going forward were revised downward to expecting the GDP to grow "in a range between 1.1% and 1.7% in 2008, and between 0.6% and 1.8% in 2009."

The Eurozone's weakening economic growth and the speculation that interest rates may have to come down has propelled the euro lower today in currency trading today against the U.S. dollar, Japanese yen, British pound, Swiss franc and the Canadian dollar. The euro fell to the lowest level against the U.S. dollar today since December 21st of 2007 and to its lowest level verses the Swiss franc since April 16th. Against the Japanese yen, the euro declined to its lowest point since March 24th.

The British pound sterling also saw negative results in the currency markets today as the pound fell verses most major currencies except the euro. The pound declined to its lowest level verses the U.S. dollar since April of 2006 while falling to the lowest level verses the Japanese yen since January 2005.

GBP/JPY Chart - The British pound sterling declining today against the Japanese yen to its lowest level since 2006(Monthly Chart).

Forex Chart

tags: interest rates, ecb, boe, england, europe, currency trading

Blog Index