The EUR continues to lose ground against the Dollar as added market risk weighs on the European currency. However, the currency did break a 4-day losing streak against the GBP to close the day up at 0.9020.
The EUR/GBP, which last year saw an appreciation in excess of 26%, has given back some of those gains so far this year. The drop in the GBP's valuation stems from an ever more deteriorating economic situation. The Bank of England (BoE) has slashed Interest Rates, at times cutting rates much faster and steeper than forecasted. British Interest Rates are predicted to fall close to 0% in the near future, and the next step of action perhaps could be the printing of new money or the purchase of commercial debt to stimulate the British economy.
The economic downturn has been very sharp for Britain and currently Interest Rates stand at an all time low. Despite the British recession, the Pound may be poised to head higher against the EUR on future European Interest Rate moves later this week.
Most traders are anxiously awaiting the Interest Rate decision by the European Central Bank (ECB). In this Thursday's meeting, the ECB is expected to cut rates by 0.50%. So despite the recessionary trends, we may see the EUR/GBP head lower on ECB rate cuts, with perhaps a return below the 0.8900 mark.