The euro fell 1 per cent to hit a seven-month low against the dollar today on expectations the ECB would leave rates unchanged today despite evidence of slowing European growth.
Today’s losses took the euro below $0.84 for the first time since November 27th, according to Reuters data.
The latest bad news for the euro was that German unemployment rose by 22,000 in June on a seasonally adjusted basis.
Unlike the US Federal Reserve, which has been focused on how much to cut to help the economy,the ECB is trying to find how little it can cut to get acceptable growth, said Citibank currency economist Mr Steven Englander.
Final results of a Reuters poll on Tuesday showed 17 out of 28 economists at banks and research groups expect the ECB council to leave its lending rate at 4.50 per cent.
Expectations the ECB would leave rates unchanged when it announces its rate decision were reinforced after ECB chief Mr Wim Duisenberg's comments this week that it had no new information to suggest a rate change was warranted.
"This is an exceptionally difficult day for the euro," said London-based Commerzbank currency strategist Mr Nick Parsons.
"The ECB is in a total lose-lose situation. It will be criticised for not cutting rates in the face of a sharp slowdown in growth, but it will also be criticised if it cuts rates at a time when inflation is high and the money supply rising."