The euro lost marginal ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5720 level and was capped around the $1.5815 level. The common currency extended some of yesterday’s intraday losses as traders continue to position themselves ahead of Thursday’s interest rate decision by the European Central Bank in which policymakers are expected to life the main refinancing rate by 25bps to 4.25%. The big question on traders’ minds is whether or not the ECB will continue to raise rates this year, especially as provisional June harmonized consumer price inflation data printed at 4.00% for the entire eurozone, double the ECB’s 2.0% ceiling target. Data released in the eurozone today saw the May jobless rate steady at 7.2% with Germany’s jobless rate steady at 7.4%. Germany’s DIW institute lifted its German 2008 GDP growth forecast to 2.7% from 2.0%. The common currency backpedaled after it was reported that EMU-15 June manufacturing contracted for the first time in three years as inflation pressures mounted. Germany’s June PMI survey came in above forecast at 52.6. In U.S. news, the June ISM manufacturing index increased to 50.2 from 49.6 in May while the prices sub-index soared to 91.5 from 87.0, their highest reading since July 1979. There were pullbacks in the June new orders and employment sub-indices. Euro bids are cited around the $1.5645/ $1.5230 levels.
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