14 May 2001, 11:57 Forex: Euro weaker in early London on Italian election, ECB concerns
LONDON (AFX) - The euro was weaker in early trade on disappointment
at the lack of a decisive majority in the Italian election and on
ongoing concerns about the European Central Bank's shock interest rate
cut last week, dealers said.
Dealers said the fact that Italy's centre-right did not win by as
much as expected at the weekend had triggered fears of political
stability which were weighing on the single currency.
They said controversy surrounding Italian prime minister-elect
Silvio Berlusconi's massive media interests was a further negative for
the euro.
"While the Italian election result is not a big deal in itself for
the euro, it's just another straw that the poor old camel's got to
carry round with him," 4cast currency strategist Paul Bednarczyk said.
WestLB economists said that given Berlusconi's "more sceptical view
on Europe plus concerns about his tax-cutting plans, the election
outcome may serve as another reason to sell the euro which had its
lowest weekly opening so far this year".
Dealers said the market was still perplexed by the ECB's rate cut
last Thursday, which followed signals that it would not move until
inflation fell to nearer its ceiling of 2.0 pct.
"The ECB's credibility is in doubt, and that's not helping the
euro," Bednarczyk said.
In the UK, the euro was dragging sterling lower ahead of the
release of what is expected to be a modest increase in producer prices
for April.
Otherwise, dealers said market participants were waiting for
tomorrow's meeting of the U.S. Federal Open Market Committee.
They said that following Friday's robust U.S. consumer figures,
expectations of a further 50 basis point cut were no longer set in
concrete. The dollar could come under pressure if the cut was a smaller
25 basis points, they said.
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