Euro at 3-Week Low vs. Dollar on Low Inflation

European Central BankThe European single currency bottomed near the 3-week low against the U.S. dollar and significantly fell against the Japanese yen and the British pound today as the investors expect further rate cuts from the European Central Bank.

There are two factors for the euro’s current weakness that the analysts name as the main — the new proposed stimulus plan by the U. S. President-elect Barack Obama (adds great advantage of the optimism for the U.S. dollar) and the low expectations for the Eurozone’s CPI, which would allow ECB to cut the interest rates.

As the first January daily trading sessions show the euro failed to rally against the dollar, showing the lack of euro bulls’ commitment to push the currency up against its major counterparts. The situation in the economies of the European countries isn’t much better than the ones of the U.S. or U.K. and with a lot of space for the rate reductions, euro won’t be too popular among the Forex traders.

EUR/USD fell from 1.3628 to 1.3356 as of 12:12 GMT today — the lowest level since December 12. EUR/JPY declined from 127.01 to 125.58, while EUR/GBP went down from 0.9281 to 0.9128.