BERLIN -- The latest battle between global foreign exchange markets and the European Central Bank over interest rate policy in the 12-member eurozone could come to a head this week with the notoriously stubborn ECB widely tipped to deliver a cut in borrowing costs of up to 50 basis points.

Moreover, with the euro having surged ahead, a meager eurozone growth rate and talk of deflation in Europe's biggest economy, Germany, some analysts believe that the ECB could be forced to hand out more rate cuts in the coming months.

Thursday's expected announcement by the ECB's 18-member rate- setting council that it was easing monetary policy for the first time since March will follow a meeting of Europe's other leading central bank, the Bank of England, DPA reported.

But coming in the wake of signs of a pickup in British House Prices and a modest rise in confidence among Britain's consumers, most analysts believe that the Bank of England's Monetary Policy Committee will leave its benchmark repo rate at a 48-year-low of 3.75 percent when it convenes in London next week.

The outcome of next week's Bank of England meeting appears to be a close call because the bank last changed rates in February, surprising markets with a 25 basis points cut.

But after the ECB disappointed markets and kept rates on hold at its last two monthly meetings, analysts now believe signs the euro's continuing sharp escalation has finally tipped the balance in favor of the ECB reducing its benchmark refinancing rate to just two percent.

While some analysts believe that keeping British rates on hold will help the pound, they also see the euro's strength as the key argument for the ECB acting on interest rate policy.

They stress it is not so much the euro's current level that is the problem, but the recent rapid appreciation in the currency, which has leapt by 13 percent this year and last week bounded ahead to a lifetime high of 1.19 dollars.

The euro is entering a new trading week hovering around 1.18 dollars with the common currency's ascent having largely cancelled out the benefits of the ECB's 25 basis points cut in March.

Indeed, the scale of the euro's rise, which has already set alarm bells ringing across industry about the outlook for the eurozone's key export machine, means that many economists have in recent weeks changed their ECB rate forecasts to an aggressive 50 basis points.

Previously the consensus forecast was for a 25 basis points cut this month. Even this would have brought official rates down to their lowest level in any eurozone member state since 1948.

Some economists believe that the ECB's insistence that the eurozone will stage a modest economic upswing during the second half of the year means the bank will err on the side of caution and trim rates by only 25 basis.

ECB council members have been adding to market expectations that a rate cut is on the way by dropping heavy hints that a monetary easing is on the works. ECB chief economist Otmar Issing said it was "absolutely clear that the slowing of inflation is linked to the euro's strengthening, and with this the monetary policy room for maneuver has also changed."

Crucial to the ECB's monetary policy decision will be the outlook for inflation. Some forecasters believe the European Union's flash estimate for consumer prices in the eurozone, which is to be released Monday, will show inflation in the currency bloc dipping below the ECB's two percent threshold.