The euro fell below $1.20 for the first time in 10 months on Friday as traders bet that euro zone interest rates will eventually be cut and make the dollar an even more attractive destination for investors. A combination of Sweden's central bank slashing interest rates this week and the Bank of England moving closer to lowering rates has thrown the spotlight on the European Central Bank. ECB officials have held firm that current rates at 2 percent are appropriate, but political pressure has mounted on the euro zone's central bank to do something about the region's struggling economy. Speculation about a rate cut has heated up in the wake of the French and Dutch "no" votes on the European Union constitution and the failure of EU leaders to settle on a long-term budget. The euro spiked as low as $1.1981, according to data from electronic trading platform EBS. The common currency bounced back to late New York levels around $1.2035 by 0547 GMT, though most analysts expect a relapse to below $1.20. "I'd thought it was just a matter of time before the euro broke below $1.20," said Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp. "I think the euro will spend more time below $1.20 than above that level next week." With the Federal Reserve poised to keep raising U.S. rates, investors have flocked to the dollar for its yield appeal. The next week will provide a key test of whether the euro will continue its 11 percent slide against the dollar in the past three months. "We anticipate euro weakness may continue through the coming days," currency strategists at Morgan Stanley said in a note to clients.