LONDON (AFX) - The euro continued its slide in early morning trade on continued concerns over the European Central Bank, dealers said. They said the ECB's about-turn, without forewarning, after weeks of saying that it was not about to cut while inflation remained high, had damaged the markets' confidence in the institution. "It was a crazy build-up to the cut," Daragh Maher, senior economist at ING Barings said.
"They've been reading from a different script for the last few weeks then changed their minds. When people had a chance to look at the decision it smacked of panic," he added.
"Yesterday's decision makes the ECB look like it is worrying about growth not inflation, but inflation is at 2.8 pct so what does this mean? Their credibility is damaged," Maher said.
He said the bank tried to speak with one voice but that this had only served to conceal the range of views within the bank, increasing the surprise at the cut.
"The euro is still reacting to the ECB decision and there is a loss of confidence in the central bank," Adrian Schmidt, a strategist at Royal Bank of Scotland said.
"The ECB cut without providing a good reason and this is not the way people think a central bank should act, and this has undermined confidence in the euro," he added.
Economists said that at this moment, the weakness in the euro is more a question of a loss of confidence in the ECB than fears that the cut could fuel inflation.