The European Central Bank (ECB) is expected to leave interest rates unchanged today when its governing council meets in Frankfurt. The meeting takes place amid mounting speculation that the ECB could intervene in the financial markets to support the euro, which fell this week to its lowest level against the dollar for six months.
Remarks at the weekend by the ECB president, Mr Wim Duisenberg, and the Bundesbank president, Mr Ernst Welteke, have fuelled speculation about intervention.
Mr Duisenberg told central bankers and International Monetary Fund representatives in Singapore that the euro had a strong potential value. In a radio interview in Berlin, Mr Welteke recalled last October's intervention, which, he said, had shown the markets that the ECB had the capacity to support the euro.
"In the European system of central banks, we have considerable reserves and we could intervene with these reserves if we think it is appropriate and likely to succeed," he said.
Data released yesterday showed a slowdown in the services sector in France and Germany. And the French finance minister, Mr Laurent Fabius, said economic growth in France would be slower than expected this year. He said it was impossible to tell when the global economic slowdown would end.
The EU Economic Affairs Commissioner, Mr Pedro Solbes, said this week that economic activity in the EU remained "relatively robust". But he said the latest data from the US pointed to a renewed loss of momentum.
Currency analysts believe the euro could fall even further against the dollar during the six months before notes and coins are introduced.
