The euro rose, rebounding from a seven-week low
against the dollar, on speculation European Central Bank President
Jean-Claude Trichet will signal higher interest rates may be needed to
combat inflation.
The 15-nation currency also advanced against the yen before the ECB's
meeting tomorrow, at which it's forecast by analysts keep its key
interest rate at 4.25 percent.
``The risk for tomorrow is that the ECB will come across as more
hawkish than the market is expecting,'' said Adam Cole, head of global
currency strategy in London at Royal Bank of Canada. ``Commodities
prices may be falling, but it's the second-round effect that policy
markers are worried about. In the near-term, that should provide some
support for the euro.''
The single currency pared gains after factory orders in Germany, the
region's largest economy, unexpectedly fell in June, increasing the
likelihood Europe's largest economy contracted in the second quarter.
The inflation rate for the euro region rose to 4.1 percent in July, the
fastest pace in more than 16 years, more than double the pace ECB
targets.
Traders pared bets yesterday that the Fed will raise interest rates by
year-end. Futures on the Chicago Board of Trade showed a 46 percent
chance the Fed would increase its target lending rate by at least a
quarter-percentage point on Dec. 16, down from 73 percent on Aug. 4.
``They are clearly not signaling tightening,'' said Benedikt Germanier,
a currency strategist at UBS AG in Stamford, Connecticut. ``The dollar
has already gained some ground. While commodities continue tanking, the
rally can last a little bit longer here.''
EUR/USD: Has extended the high to $1.5515.
Euro-dollar then eased back under $1.5500, a US investment house the
noted seller on the way down. The move extended under $1.5470, with
added sell pressure coming from disappointing German manufacturing
data. Offers $1.5520/25, stronger $1.5545/55, stops above, bids $1.5450.
GBP/USD: Sterling stil holding around $1.9520/80
USD/JPY: Round of buying late in the morning pushed
dollar-yen to a seven-month high above Y108.60. Offers Y108.80/90,
stops Y109.05/10, bids Y108.25/20.
The Canada’s Ivey Purchasing Managers Index is due at 14:00 GMT. Also
today will be published at 14:35 GMT EIA Crude Oil Stocks change of
USA.