May 2 11:25 GMT
The euro declined by 27 points to 1.3146 from 1.3173 against the dollar in a lackluster trading session in Europe as market participants stayed on the sidelines ahead of the European Central Bank interest rate announcement at 11:45 GMT today. The ECB is widely expected to cut its main refinancing rate by 25 basis points to 0.50 percent which will be the first time in ten months, driven by the sagging Eurozone economy and falling inflation.
ECB Vice-President Vitor Constancio mentioned last week that there was still room to cut interest rates, reiterating the central bank’s readiness to act should the economy deteriorate further. Some analysts are skeptical of the outcome of the cut with perhaps limited effect on the short-term run. Not all German leaders are in favor of the rate cut. Last week, German Chancellor Angela Merkel said that the ECB would have to raise interest rates if it were looking at Germany alone.
If the ECB does indeed cut 25 basis points, it has already been priced into the market as the rates fell steadily to the 1.3150 support line.
The 14-day, 21-day and 30-day moving average all had a similar pattern and showed a support line at 1.3155.