Dollar Trading Low As ECB Decision Looms

Daily Forex Fundamentals | Written by Finotec Group | Jul 03 08 09:10 GMT |


The dollar is trading near a two-month low against the euro as economists and traders forecast the European Central Bank will raise its main interest rate by a quarter- percentage point to 4.25% and U.S. payrolls are predicted to drop for a sixth month. The currency was also near a three-week low versus the yen on speculation an industry report today will show growth in U.S. services industries slowed for a second month. 'Bad news comes from the U.S. everyday,' said Toru Umemoto, chief currency strategist in Tokyo at Barclays Capital Inc., a unit of the U.K.'s third-biggest bank. 'The ECB's rate hike today is a done deal and the ECB will remain hawkish. The euro may rise above $1.60 against the dollar today.'

The U.S Labor Department will probably report today that U.S. employers cut 60,000 jobs including government staff last month, according to the median forecast of 79 economists surveyed by Bloomberg. The dollar weakened 1.2 percent against the euro and 1 percent versus the yen on June 6, when the government reported that the U.S. lost 49,000 jobs in May. However losses in the dollar may be limited by speculation U.S. officials will verbally intervene to stem its decline and slow gains in oil prices before a Group of Eight summit. Leaders from Canada, France, Germany, Italy, Japan, Russia, the U.K. and the U.S. will meet in Hokkaido, Japan, from July 7.

The dollar dropped to $1.5891 per euro, the weakest level since April 24, now currently trading at $1.5871 as of 7:36 am, GMT, from $1.5882 yesterday. The U.S. currency fell to an all-time low of $1.6019 per euro on April 22. The dollar is currently trading at 105.99 yen as of 7:37 am, GMT from 105.91 in New York. The euro trading at 168.21 yen from 168.20.

The pound/sterling fell to a three-week low against the euro as Taylor Wimpey Plc, the U.K.'s largest homebuilder, had a record drop in London trading after failing to raise fresh funds from investors. 'Taylor Wimpey is regarded as a benchmark for the housing industry, so their plight is indicative of the difficulties facing the whole sector,' said Neil Jones, head of European hedge-fund sales at Mizuho Capital Markets in London. 'There's a high correlation between the performance of the housing market and that of the pound.' GBP/USD currently trading at 1.9899 as of 8:07 am, GMT.