The European Central Bank (ECB) must cut rates by 50 basis points this week to curb the rise in the euro and spur growth, according to economists. The central bank is expected to cut at least 25 basis points off borrowing costs at its meeting on Thursday, but analysts say it should take greater action. Although the ECB is not mandated to use growth or the euro exchange rate as the basis for a rate cut, it must take these factors into account. The eurozone economy will barely grow by 1pc this year and the rapid appreciation of the euro is hampering exports and will affect jobs growth, say analysts.
"The euro's rise is dangerous and unsustainable. The ECB cannot ignore it," said Niall Dunne, economist at Ulster Bank. A 50 basis point cut now would help growth and would show that the ECB is not happy with the rise of the euro, which is eroding competitiveness. "If the euro's rally had occurred over 12 or nine months, it would be different... five months was too fast," said Dunne. ///www.fxcentre.com/