Euro surges through 1999 launch value

The European Central Bank came under fresh pressure to cut interest rates yesterday as the euro broke through its launch value against the dollar.

Sterling also lost ground against the single currency although it gained slightly in value against the dollar as the US currency tumbled on the foreign exchanges.

In early European trading, the euro surged through its launch value in January 1999 of $1.1747, rising as high as $1.1809 before falling back slightly to close at $1.1801.

Against sterling, the euro rose to 71.89p having earlier hit a record overnight against the Japanese yen of 138.1.

The decline in the dollar marked the seventh straight week that the currency has lost value against the euro and traders said they were braced for more to come. "Our jaws dropped to the floor when we arrived this morning," a senior currency strategist at Bank of New York said. "Traders won't stop until they see the dollar at $1.20 per euro. This decline goes far beyond the economic fundamentals of the US in relation to Europe or Japan."

In the past 12 months the US currency has fallen by 21 per cent against the euro as traders become more and more convinced that the Bush administration has aban- doned the "strong dollar" policy. It has fallen 5.2 per cent so far this month alone - the biggest monthly decline since December last year.

Sterling, meanwhile, was largely unmoved by revised data showing that the UK economy grew by just 0.2 per cent in the first quarter of the year - its weakest pace in 12 months.

Growth in household spending, until now the main engine of the economy, slowed sharply to just 0.4 per cent between January and March, reinforcing the view of the Governor of the Bank of England, Sir Edward George, that a slowdown in consumer spending is under way.