* Euro near 2-month lows; sterling tumbles broadly
* Euro zone factory PMI lands in line with expectations
* Aussie falls before expected hefty rate cut by RBA
(Recasts, adds comments, changes byline, dateline; previous
LONDON)
By Vivianne Rodrigues
NEW YORK, Feb 2 (Reuters) - The euro fell on Monday,
trading near two-month lows against the dollar, while sterling
sank against the U.S. currency, hurt by deepening worries over
the health of Britain's financial sector and economic outlook.
Fears of a deepening crisis also helped boost the yen.
Moody's Investors Service said it was cutting its long-term
ratings on Barclays Bank. For more see []. This
prompted a sell- off in bank shares in Europe. []
U.S. stock index futures <SPc1> also pointed to a lower
open on Monday on Wall Street.
Manufacturing data in Europe showed a slight increase in
January, but the reading still pointed to a deep recession.
[]
U.S. December data on personal spending and income
suggested further weakness in the consumer sector, reinforcing
the view of a protracted low interest rate climate, analysts
said. []
The figures "certainly suggest the Fed will remain in an
ultra-easy mode in the foreseeable future," said Omer Esiner, a
senior market analyst at Ruesch International in Washington.
"On balance, the sharp decline in consumption, the largest
component of the U.S. economy, suggests that the U.S. and the
global economy are biased significantly lower."
In morning trading in New York, the euro was 0.1 percent
lower at $1.2767, after falling to $1.2707, its lowest since
Dec. 5, according to Reuters data <EUR=>.
Sterling was down 2.7 percent at $1.4118 <GBP=>, and more
than 2.6 percent weaker versus the euro at 90.38 pence
<EURGBP=>, with moves exacerbated by thin conditions in
London.
Traders said buying of euro/sterling by a large UK bank was
accelerating the pair's rise and taking the sting out of
euro/dollar's fall.
Earlier, a report showed an index of British manufacturing
was slightly better than expected although it was still the
third-lowest since the series began in 1992. []
"The data wasn't as weak as expected, but it's probably the
smallest crumb of comfort you could possibly find," Rabobank
markets strategist Jeremy Stretch said in London.
"The same factors are predominant in terms of risk,
nervousness and uncertainty, which means the same old
beneficiaries in terms of dollar and yen," he added.
RATES EYED
The pound is also feeling pressure from expectations that
the Bank of England will cut key interest rates by 50 basis
points from the current historic low of 1.5 percent.
The European Central Bank is expected to keep rates on hold
at 2 percent when it meets on Thursday but take action in March
as growth and inflation slide to new lows, a Reuters poll
showed. []
This week's focus "will certainly be on the central bank
meetings where there is a small risk the ECB could respond to
the recent slew of weak euro zone data and easing inflation
with a cut," Marc Chandler, a currency strategist at Brown
Brothers Harriman, said in a note.
"In the UK, we believe that a further 50 basis point rate
cut is likely on Thursday and more details will also be
unveiled regarding the Bank's quantitative easing agenda."
The Australian dollar fell earlier to a more than two-month
low of US$0.6248 <AUD=D4> as weak Australian housing data
reinforced expectations of a bold rate cut on Tuesday.
Analysts expect the Reserve Bank of Australia to cut its
key cash rate by 100 basis points to 3.25 percent, a Reuters
poll showed. []
(Additional reporting by Veronica Brown in London; Editing by
James Dalgleish)
