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Forex Trading

Wednesday, December 17, 2008

Banks Slash Rates; Pound, Euro, Franc Drop

The Europe’s currencies posted a daily drop against the U.S. dollar after showing a moderate volatility during the early trading session after the regional central banks cut the interest rates at an unexpectedly large scale.

An increased volatility on the Forex market was the direct reaction to the series of the interest cuts performed by the central banks of the United Kingdom, Eurozone and Switzerland today. Just after the surprisingly big cut by the Bank of England, pound began to recover against the dollar and the Japanese yen but after the Swiss National Bank and the European Central Banks also cut the rates, the pound and other European currencies went down.

Bank of England lowered the interest rate by 150 basis points today — down to 3 percent. The largest expected cut was 100 basis points and it wasn’t quite a popular forecast. Swiss National Bank cut the Libor target range by 50 basis points to 2 percent average. European Central Bank also slashed 50 basis points from the 3.75 percent rate, showing its conservative character even during the harsh crisis times.

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