The Sterling Tumbles As Traders Bet On A Rate Cut To 2%

The Sterling declined against the euro as stocks fell and traders raised bets the Bank of England will cut interest rates this week to prevent the economy from sinking deeper into a recession. Policy makers will lower the U.K.'s key interest rate by 1 percentage point to 2 percent this week to revive the economy according to traders and economists. 'You only have to look at what happens to equity markets to understand what's going on with the pound,' said Neil Mellor, a London-based currency strategist at Bank of New York Mellon Corp 'It's all about risk aversion. Sterling is trending lower, and growing doubts about whether radical rate cuts by the central bank will revive the economy didn't help.' The GBP/USD is currently trading at $1.4805 as of 8:39am, GMT.

The dollar may fall to its post-World War II low of 79.75 yen by July based on technical analysis, said Masashi Hashimoto, a currency analyst at Bank of Tokyo- Mitsubishi UFJ Ltd. 'The dollar's monthly chart is a good indication that the longer-term trend is for the currency to depreciate,' said Hashimoto at the unit of Japan's largest publicly listed lender. 'We've seen before how far the dollar can fall when financial turmoil spurs a broad-based liquidation in traders' positions.' The USD/JPY is currently trading at 92.85 as of 8:45am, GMT.

European Union Competition Commissioner Neelie Kroes will discuss the proposed recapitalization measures at a meeting of EU finance ministers in Brussels today. The revised policy would clarify when governments' can give new capital to 'fundamentally sound' banks, said the officials. Governments across Europe are seeking to shore up the financial system after the credit crisis froze inter-bank lending over the past two months. Some European governments, such as Spain, are worried that bank rescues could distort competition and break antitrust rules by leaving lenders better capitalized than institutions in other countries. The EUR/USD is currently trading at $1.2585 as of 9:00am, GMT.

Economic Calendar

Finotec Group Inc.
http://www.finotec.com/

Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.