Euro slumps 'to 3-week low'

The euro slumped to a three-week low in Forex trading yesterday (January tth) as declining inflation in the euro zone led investors to suspect the European Central Bank (ECB) will continue to cut interest rates.

Inflation came in at 1.6 per cent on the year, down from 2.1 per cent in November, leading to a weakness in the currency not seen since the middle of December.

Adam Cole, global head of currency strategy at RBC in London, said the new data will allow the ECB to cut interests when they meet next week.

"The balance of news from Europe is so poor that the market is perceiving that the ECB is behind the curve (on rates)," he commented.

According to Reuters, the ECB is expected to cut the main lending rate by 50 basis points.

In similar news, the money markets in the US increased by the most since November.