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."
Trichet's comments left the door open for further rate cuts moving forward as the European policy makers grapple with the stark reality that the world is on the verge of a deep, prolonged recession.
The euro, which closed yesterday's trading at 0.8142 against the pound strengthened to 0.8196 during early deals on Friday. This set the highest point for the European currency since October 24 and slightly below a record high of 0.8199.
The Bank of England also reduced its key interest rate by a bigger-than-expected 1.5 percentage points to alleviate the mounting pressures on economy. At the end of its two-day meeting, the Monetary Policy Committee decided to slash the official Bank Rate paid on commercial bank reserves to 3% from 4.5%. Economists had expected the BoE to cut the rate by 50-100 basis points.
The central bank has not cut the rate by more than 50 basis points since 1993. This is the lowest rate since 1955 and the single largest cut since the central bank gained independence in 1997. This is also the largest reduction since 1981, when the benchmark minimum lending rate was cut to 12% from 14%.
Against the currencies of US and Switzerland, the euro slipped to a 3-day low of 1.2655 and 1.4929 by about 8:20 pm ET Thursday. Thereafter, the euro bounced back and it is currently trading at 1.2849 against the dollar and 1.5037 against the franc, compared to yesterday's close of 1.2721 and 1.4986, respectively. If the euro gains further, it may test resistance around 1.303 against the dollar and 1.151 against the franc.
Switzerland's State Secretariat for Economic Affairs or SECO said today that the unadjusted unemployment rate increased to 2.5% in October from 2.4% in September. That was in line with economists' expectations. Meanwhile, the seasonally adjusted jobless rate remained unchanged at 2.6%, matching the consensus forecast.
Yesterday, the Swiss National Bank unexpectedly lowered its three-month Libor target range by 50 basis points to 1.5%-2.5% with immediate effect. This translates to a reduction in interest rate to 2% from 2.5%, the second rate cut in a span of one month. The central bank said it intends to hold the rate in the middle of the target range for the time being.
The latest interest rate move was out of schedule and was the biggest reduction since March 2003. The central bank was not scheduled to announce a rate decision until December.
The European currency fell to a 1-week low of 122.49 against the yen before bouncing back at 8:20 pm ET Thursday. The euro-yen pair is presently quoted at 125.31, up from yesterday's close of 124.31. The next upside target level for the euro-yen pair is seen around 130.1.
Looking ahead, the German September industrial production report is due in the upcoming hours.
Turning to the US, the nonfarm payrolls data for October, wholesale inventories, pending home sales and the consumer credit reports for September have been slated for release in the North American session.
Meanwhile, Atlanta Federal Reserve President Dennis Lockhart will speak on the economic outlook in Palm Beach.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.