19.05.2008 16:28

European session: euro holds positions

The dollar slipped to a 2-1/2 week low against a basket of major currencies on Monday, as the worst U.S. consumer confidence reading in nearly three decades raised concerns about stagflation. The May Reuters/University of Michigan index of U.S. consumer confidence dropped to 59.5 on Friday, the lowest level since June 1980, while short-term inflation expectations surged to their highest in a quarter of a century. The dollar traded near the lowest level in more than two weeks against the euro before an industry report this week that may signal the worst housing slump in a quarter of a century is deepening.

EU Construction production decreased on the month in March on weak demand in both building and civil engineering, more than offsetting February's upwardly revised gain, Eurostat said Monday. March's 2.2% monthly decrease left output down 1.4% on the year. Taking into account an upward revision for February to +1.6% from +1.2% and a minor downward
correction of January data, production in 1Q stood 2.3% above 4Q output, which was revised up 0.4 point by Eurostat to -0.1% q/q. Looking ahead, tighter lending terms and a widespread cooling of housing markets are likely to weigh on construction as well as overall investment.

EUR/USD: Opened in early Europe around $1.5580. German demand was reported in early European dealing, driving the pair back up towards the overnight high. The well reported stops through $1.5610/20 were then targeted and triggered, with rate able to advance to $1.5632. Euro-dollar eased back slowly over the rest of the morning, dipping under $1.5600 ahead of the US open, with rate trading back at $1.5575 at time of writing. Strong offers $1.5640/55, further supply $1.5670/80, stops $1.5710. Small bids $1.5590, stronger $1.5560/50, stops $1.5540
GBP/USD: Opened early Europe at $1.9575. Rate retained a heavy tone into early Europe, extending losses to $1.9542. Offers between $1.9625/35 capped with rate slipping back eventually to $1.9550. Cable bids $1.9550/40, $1.9525/20. Offers $1.9625/35, $1.9650/60
USD/JPY: Opened in early Europe around Y104.08. With the dollar on the backfoot into early Europe, dollar-yen slipped to fresh lows for the day, ultimately finding a base at Y103.64. Rate managed to hold away from stops under Y103.50, ending the morning back around Y104.00. Dlr-yen offers Y104.30, tech Y104.47, offers Y105.00/10, bids Y103.60

US data today includes only leading indicator reading at 14:00GMT.