Euro holds near highs, eyes ECB, US jobs data

LONDON - The euro held near its highest level against the dollar in nearly a month on Wednesday, with investors looking to an expected European Central Bank rate rise later this week but less certain on the outlook for US rates.

By (Reuters)

Published: Wed 2 Aug 2006, 7:22 PM

Last updated: Sat 4 Apr 2015, 2:02 PM

Currency markets brushed off euro zone producer prices data and steadied themselves ahead of Thursday’s ECB meeting and Friday’s US payrolls numbers.

“I think we’re in a bearish dollar phase. You’ve got erratic conditions in the summer period. Any time the dollar blips higher there are plenty of people willing to sell dollars,” said Tony Norfield, currency strategist at ABN AMRO.

“When the US rate premium is getting whittled down that puts the dollar in a vulnerable position. If you go along with the view that the Fed will pause, that makes it harder.”

Against a basket of currencies, the dollar fell to its lowest level since July 7, at 84.91, but recovered slightly by 1015 GMT to 85.10.

It was up 0.2 percent at $1.2800 per euro, having hit a one-month low of $1.2835 earlier, while it was steady at 114.53 yen.

Against the yen, the euro lost around 0.2 percent to trade at 146.59 yen.

Data on Tuesday showing robust US manufacturing growth and a rise in the US Federal Reserve’s favoured inflation gauge to a four-year high failed to dispel mounting expectations that the Fed will hold rates steady at 5.25 percent on Aug. 8.

Contrasting rate expectations

Before the payrolls data, investors are looking to a private sector report on US employment in July, due at 1215 GMT. It is one of the last pieces of data that could influence Fed expectations for this month.

Last month, the ADP National Employment Report came in

strong, hardening expectations for an August Fed hike. But it was followed by soft June non-farm payrolls and by a sharp slowdown in US economic growth in the second quarter.

On Tuesday, Fed futures were pricing in around a 40 percent chance of an August rate hike, down from 78 percent after last month’s ADP report.

The ADP report is forecast to show private employers added 155,000 new jobs in July, down from 368,000 in June.

In contrast to the Fed, an ECB rate rise to 3.00 percent this Thursday is seen as a near-certainty, with most analysts then forecasting at least a further two more hikes by year-end.

Euro-zone June producer prices rose 5.8 percent year-on-year, down from 6.1 percent in May.

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