The Euro is having serious problems as it fell yet again against the dollar and the yen thanks to growing speculation among investors and market analysts that the European Central Bank will cut interest rates on November 6, 2008 and signal that additional cuts may be needed if they are going to halt an economic slump.  The currency which is used by 15 nations has fallen against the dollar for the last six days and the ECB may be forced to lower their main refinancing rate to an unprecedented 1 percentage point before the day is out.

According to Jeremy Stretch, a senior strategist for Rabobank International, the third largest Dutch banker, “The market is pretty certain we’re going to get 50 basis points from the ECB.  I suspect the accompanying rhetoric will be dovish and they’ll continue to talk of downside risks to growth.”

The Euro fell against the dollar to $1.2835 on the 6^th in New York from $1.2954 the day before, to 126.02 yen from 126.89, and it could very well fall to $1.2795 before trading ends on the 6^th.  The entire euro-region economy is rapidly shrinking for factory orders dropping and other industries feeling the weight of the global crisis.  Analysts do not expect it to be any better during the 4^th quarter of 2008, and they feel that a 100 basis point reduction by the ECB would allow the euro and the economy a chance to be bolstered.

Analyst Tom Fitzpatrick out of New York wrote that such a cut would be unprecedented and that “An aggressive rate cut is unlikely to mark a sustained decline in the euro and, tactically, an intraday dip should represent an attractive buying opportunity.”  The ECB is supposed to make an announcement on the 6^th from Frankfurt, and it will be interesting to see how the announcement is received.  They have already lowered its benchmark rate to 3.75 in October when they joined the Federal Reserve, the Bank of England, the Bank of Canada, and the Swiss National Bank in a coordinated global reduction effort to kick start the world’s flagging economies.

Currently some investor eyes are still on the dollar itself and the poor economic American conditions that are still deteriorating.  Even with President-elect Barack Obama working on a $175 billion ‘middle-class rescue plan’ being worked on to help spur growth, things could still deteriorate more before getting better.  There are reports that the Fed may halve their target rate for overnight lending between banks by December 6 and that further deleveraging across the global markets may still be yet to come.