The dollar dropped against the euro for a second day as declines in housing and
industrial production raised speculation that the Federal Reserve will delay
increasing borrowing costs this year.
Sterling dropped versus euro as King predicted British inflation will exceed 4% this year. The rate
accelerated to 3.3% in May, the highest level since at least 1997, the Office
for National Statistics said in a report. Mervyn King said the path to bringing
inflation within the central bank's target is ``uncertain.''
U.S. housing starts dropped to an annual
rate of 975,000 in
May, from a revised 1.008 million the previous month, the Commerce Department
said. It was the lowest since March 1991.
Production in U.S. factories,
mines and utilities declined 0.2% last month after dropping 0.7% in April, the
Fed reported. Economists had forecast industrial production would rise 0.1%.
The dollar weakened earlier against the euro after the Wall Street Journal and the
Financial Times reported the U.S.
central bank would probably leave borrowing costs unchanged beyond its June
policy meeting.
The euro pared gains against the dollar after a report from the Mannheim-based ZEW Center
for European Economic Research showed investor confidence in Germany fell this month to the
lowest in more than 15 months.
EUR/USD tested
$1.5550 before retreating to $1.5460. Later rate could rebound to $1.5526.
GBP/USD tested
$1.9700, but failed to break above the figure and retreated to the lows around $1.9470.
Later rate recovered to $1.9580.
USD/JPY held
between the Y107.60/Y108.40 range.
Main focus is on MPC’s minutes, when BOE decided to leave rate unchanged at 5.0%.