By Anna McLauchlin - 24th March 2004
The euro has slipped against the dollar following indications that the European Central Bank will consider cutting interest rates if consumer demand does not pick up as hoped.
Around midday on Tuesday the euro had fallen to $1.2247 from its closing level of $1.2339 on Monday.
In a German interview published on Tuesday ECB president Jean-Claude Trichet said "If our forecasts for a strengthening of household consumption and global domestic consumption do not materialise we will reexamine our evaluation of the situation".
And ECB board member Guy Quaden told Le Monde, "It's true that we still have some ammunition if the outlook on inflation allowed and the outlook for economic activity made it desirable".
Quaden said the recent bombings in Madrid could damage confidence in Europe.
"Trichet's comments have clearly opened the door to a rate cut, possibly in April, despite the fact that inflation has picked slightly up in March and the dollar exchange rate is at an acceptable level" says Nancy Verret, Forex strategist at Fortis Bank.
"But he could just be signalling a further downside to the risks."
UBS chief economist Holger Fahrenkurg believes there is little chance of a cut.
"It's a slight change in tone but a cut isn't imminent", he told this website.
"Apparently the risks have increased slightly but to be honest the backdrop to all of this isn't new."
A Reuters poll on Wednesday showed that of 62 economists all but one think the ECB will leave rates unchanged on April 1.
The ECB will meet for its monthly governors council to discuss interest rates on a monthly basis.
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