The decision by the European Central Bank to cut its main refinancing rate by 50 basis points to an historical low of 2% on January 15 came as no surprise to the foreign exchange market. Nor did the slight weakening of the euro as a result.
The general perception that the ECB remains stuck behind the curve made it almost inevitable that whatever central bank president Jean-Claude Trichet and his colleagues decided to do, it would result in some kind of sell-off in the euro.
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