LONDON (AFX) - The euro continued its recovery against most leading currencies in midday trade, led by a rebound in European stock markets and expectations of a rate cut by the European Central Bank at its March 29 meeting, dealers said.
BNP Paribas economist Ken Wattret said the euro performed better because the global meltdown in stock markets, which benefited the U.S. dollar, has come to a halt.
"The U.S stock markets' recovery overnight seems to have given a lift to European stock markets first thing this morning, which is unwinding the safe haven support for the dollar. The euro is benefiting," he said.
Wattret said ECB chief economist Otmar Issing seemed yesterday to favour a shift in interest rates by saying the bank should not focus on current inflation but where it will go in future.
"A pretty clear signal from the ECB that they are close to cutting interest rates is also euro-positive news."
"It may not wake the euro out of its recent slumber but it should be seen as good news from a perspective of trying to address this problem."
"We are encouraged by the fact that the ECB is taking on board the reality of the situation and looking like lowering interest rates." Sterling continued to mirror the single currency's movement, dealers said.
The performance of cable and euro/dollar over the course of the week was pretty closely linked, said Wattret.
"The U.S. has been perceived as a safe haven with the stock markets' decline. Now that the effect is beginning to unwind, sterling is benefiting in the same way that the euro is."