The euro rose by 0.1 percent overnight to $1.2932, a slight recovery after hitting a one-month low yesterday. Yesterday’s weakness came on the back of investors’ concerns over the global recession and renewed fears about the banking sector. Investors are also awaiting the ECB’s interest rate decision, where the central bank is expected to cut interest rates by 25 basis points and possibly announce non-conventional measures such as quantitative easing to tackle the recession, which other countries such as the UK and US have already undertaken. ECB President Jean-Claude Trichet indicated on Sunday during a trip to Tokyo that the bank's next move could likely be an interest rate cut of 25 basis points at its next meeting on May 7, but he failed to refer to any non-conventional measures, which resulted in increased investor concern about the euro.
US equities fell yesterday after Bank of America reported a jump in non-performing assets, underscoring the banking sector's troubles. The bank reported an increase in profit, but the fact that it reported a large increase in bad loans resulted in further concerns about the sector as a whole and prospects for an economic recovery. US data was also grim, with the Conference Board announcing that the recession is likely to continue throughout the summer.
In the UK, Alistair Darling will be announcing his budget report on Wednesday. This is likely to have an effect on most major currencies, because if the news is seen as bearish investors are likely to abandon riskier currencies and flock to the safe haven of the dollar, weakening the euro against the dollar.
In Germany, the ZEW Economic Sentiment Survey will be released at 10.00 BST this morning, whilst the ABC/Washington Post Consumer Confidence survey will be announced in the US at 22.00 BST.
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