The euro retained it grip on USD1.01 this morning after Wall St equities closed lower for a third straight session. Wall St has been on a losing streak since the Federal Reserve cut interest rates by 50 basis points last Wednesday and as prospects for a war with Iraq continue to increase, undermining the dollar against the euro and sterling.
Elsewhere, European Central Bank chef economist Otmar Issing has given a signal that the bank may be prepared to lower interest rates soon. In an interview this morning, Issing said the "medium term outlook for prices has improved", suggesting that a rate cut may be possible in December. Niall Dunne of Ulster Bank noted that the comments have made a big impact because Issing is well known as an interest rate hawk. "His inflation focus overrides any growth concerns and he very seldom votes for any rate cut," Dunne said.
The euro could fall back later today with the publication of the German ZEW survey of business confidence, which is expected to decline again. //www.fxcentre.com