November 05, 2013

Euro Recovers Against Dollar Ahead of ECB Meeting

The euro recovered some of the losses posted overnight against the dollar as trading got underway in Europe Monday, shaking off the dent from dollar strength driven by better-than-expected U.S. economic data and hawkish Federal Reserve comments at the end of last week.


The euro was trading around $1.3500 against the buck, recovering from a six-week low of 1.3442 hit against the dollar during the Asian trading session.

"The euro could remain vulnerable going into the European Central Bank meeting on Thursday.

President (Mario) Draghi could send a strong signal that an extension of the recent developments will trigger conventional and unconventional policy measures as soon as December," said Valentin Marinov, a strategist at Citigroup.

Economists at Citigroup expect the ECB governing council to step up its rhetoric following the recent appreciation of the currency.

The single currency also found some support from a positive print of euro-zone factory activity for October. Data provider Markit said Monday its monthly gauge of activity across the 17 nations that use the euro rose to 51.3 in October from 51.1 in September.A reading above 50 indicates expansion.

Elsewhere, the Australian dollar rose against the dollar, trading above $95 against the buck on the back of better- than-expected retail sales for September, up by 0.8% from the previous month.

The Reserve Bank of Australia will also deliver its rate announcement at 0330 GMT, where consensus forecast sees the key rate unchanged at 0.25%.

"The RBA's mild easing bias is likely to remain in place at this evening's policy announcement and statement.

The short statement is likely to repeat that low rates are helping the economic transition, underpinning asset prices, confidence, and a mild upswing in housing construction," said Adam Cole, a currencies strategist at RBC.

Looking at the week ahead, markets could be vulnerable to short-term volatility as a number of central banks-- including the Bank of England and the European Central Bank--will deliver their rate decisions.

On the data front, investors will watch closely the release of U.S. non-farm payroll employment data Friday.

Economist expect the U.S. labor market to have added 120,000 jobs over the month.

nasdaq.com

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