Market Overview: Euro Tests Lowest Level Against Dollar in 4.5 Months

Forex - ING stated that the Euro has fallen to its lowest level against the dollar in four and a half months and may struggle to recover due to interest rate differentials moving against the currency. ING analyst Chris Turner emphasized that short-term Eurozone-U.S. interest rate differentials remain "extraordinarily wide" in favor of the dollar. According to Turner, it seems unlikely that Germany's fiscal situation will fully improve before the federal elections, thus the European Central Bank will need to support the Eurozone economy with further interest rate cuts. ING expects the ECB to cut rates by 50 basis points in December. According to ING, this week only position adjustments will allow the Euro to strengthen, but gains will be limited. The Euro has fallen to as low as 1.06785 dollars.