Euro Tumbles as ECB Says Banks Stand to Lose Another $283 Billion

The euro fell sharply against the greenback after the European Central Bank (ECB) said that commercial banks in the region may stand to lose another $283 billion by the 2010 due to write downs. Indeed, European banks have not been as quick to realize losses as US banks have, suggesting that negative news for the European financial sector is likely to seep out for quite a while longer. Looking ahead to Tuesday, Eurostat has already estimated that Euro-zone inflation stagnated during the month of May, but traders should still keep an eye on the final reading of this report. Indeed, Eurostat may confirm that CPI stagnated on both a monthly and annual basis, the lowest readings on record. However, the European Central Bank has already stated that they anticipate that CPI growth will “decline further and temporarily remain negative over the coming months, before returning to positive territory by the end of 2009,” which may prevent speculation from arising about the prospect of additional rate cuts. Nevertheless, surprisingly weak results could still weigh on the euro upon release.