EUR Minimum Bid Rate Forecast
July 1st, 2009 Posted in Analyst Picks
The main economic event that is likely to impact the forex market this week is the release of the EUR Minimum Bid Rate on Thursday at 11:45 GMT. This decision is highly important as it may determine the rate of the EUR, GBP, as well as USD crosses in the next several days. Since the start of the recession, all the major industrialized countries have cut their Interest Rates.
The Euro-Zone has its lowest Interest Rate since the EUR’s introduction in 1999. It currently stands at 1%, from nearly 4% back in October 2008. Analysts wonder if the ECB will make further rate cuts when it comes to decision time on Thursday.
In the past 6 months, there has been a continued deterioration of the Euro-Zone economy. As a result, the European Central Bank (ECB) has continued to make successive rate cuts since October 2008. However, more recently, some improvement has been seen in certain aspects of the Euro-Zone economy. This has helped dissipate fears that Germany and France’s economies would suffer as much as Britain and the U.S. Thus the ECB hasn’t made any rate cuts for 2 months due to the limited optimism.
It is important to note that the banking crisis that has hit Britain has had a big impact on the Euro-Zone economy. Large European banks, such as Germany’s Deutsche Bank have suffered great losses. One may depict from this that the situation in the Euro-Zone is catching up with Britain. However, most analysts forecast that the ECB won’t cut Interest Rates. If this forecast turns out to be correct, the EUR may rise considerably vs. the USD and GBP. The EUR/USD rate is currently at 1.4065, and could hit 1.4135 if the ECB keeps the Euro-Zone’s Interest Rate at 1%.
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Tags: ECB, eur forecast, EUR Minimum Bid Rate, EUR/USD, Euro-Zone, European Central Bank
