Euro Rises To Near Record High Against Pound

(RTTNews) - Extending Asian session's uptrend, the euro surged to near a record high against the pound during early European deals on Friday. Meanwhile, the euro reversed its early Asian session's loss against other major currencies. The euro thus recovered from a 1-week low against the yen and a 3-day low against the dollar and the franc.

The German and the French trade balance reports, which were released today likely influenced the European currency.

Germany's foreign trade balance showed a surplus of EUR15.0 billion in September, up from EUR10.6 billion surplus recorded in August, the Federal Statistical Office said today. That was higher than the expected surplus of EUR13.5 billion. In September 2007, the surplus amounted to EUR18.2 billion.

The French Customs announced that the country's trade deficit widened to EUR 6.25 billion in September. Economists were looking for a deficit of EUR 5 billion. In August, France had recorded a deficit of EUR 5.4 billion. Exports totaled EUR 34.29 billion in September, while imports were worth EUR 40.54 billion.

Yesterday, the European Central Bank slashed its key interest by 50 basis points to support the 15-nation economy, which is on the verge of a recession. The Governing Council lowered the key-lending rate, which is the minimum bid rate on the main refinancing operations, by 50 basis points to 3.25%, as expected. The interest rate on the marginal lending facility was reduced to 3.75% and the interest rate on the deposit facility was cut to 2.75%. Economists foresee further rate cuts by mid 2009.

Following the rate cut announcement, the European Central Bank President Jean-Claude Trichet struck an uncharacteristically dovish pose in Frankfurt, suggesting that dropping commodity prices and diminishing demand will lead to price stability for the Euro area in 2009.

"The outlook for price stability has improved further," stated Trichet. "Price, costs, and wage pressures in Euro area should continue to moderate."