Euro falls on rate confusion
The euro fell against the dollar and ten other currencies as conflicting economic reports from within the eurozone added to doubts the expected interest rate rise will not be as steep as anticipated.
This morning the euro stood at 0.7831 to the dollar and at 1.4638 to the pound.
There is concern that the recent strength of the euro will hamper economic growth within the area of the economic union and this will restrict the European Central Bank when it meets to discuss raising rates on June 8th.
The ECB will have to balance the conflicting needs of several countries in what is seen as the first real test of the 'one size fits all'
interest rate system.
Germany has recently enjoyed an upturn in its economy with strong exports and rising domestic demand helping growth of 0.4 per cent in the first quarter of 2006 compared with final quarter of last year.
Overall the German economy is expected to grow by between 1.5 per cent and two per cent this year and is hoping for a rate rise to check inflation.
However, news that Italy's public deficit has been labelled a "disaster"
by the country's deputy economics minister Vincenzo Visco, and will exceed 4.5 per cent of gross domestic product (GDP) this year, will pressure the ECB to limit rate rises.
Italy's deficit is in breach of eurozone rules that state members must keep their public debts below three per cent of their GDP
"The economic situation is very serious and the state of public accounts is a disaster," said Mr Visco.