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Renita Jablonski: Europe’s key currencies are making new lows against the dollar. The pound plummeted after Bank of England head Mervyn King said the country is likely headed into a recession. As Megan Williams reports, there’s a similar outlook for the Euro zone.

Megan Williams: The euro is now back where it was two years ago, at $1.28. The pound — now at $1.62 — has dropped to where it was five years ago. That’s because investors are betting the European Central Bank has to cut interest rates again to help soften the blow of the weakening economy.

Most of Europe is already or soon to be in a recession. Major central banks cut rates by half a percentage point. Now investors are betting the ECB will cut again, maybe by as much as three-quarters of a point in the next half year or so.

Currency strategist Ian Stannard says U.S. investors are moving their money back into dollars.

Ian Stannard: In recent months, we have seen U.S. investors removing their oversees investments and taking that money back home. So that has been a trend and that is consistent with a high dollar.

Stannard predicts the euro may soon drop as low as $1.20 in the new year.

I’m Megan Williams for Marketplace.