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FX round-up: Dollar hurt ahead of ECB decision

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Date: Wednesday 02 Jul 2008

LONDON (ShareCast) - The dollar fell against major currencies Tuesday ahead of the European Central Bank’s decision on interest rates Thursday and a key US jobs report.

The ECB is widely expected to hike interest rates to help rein in inflation.

Initial enthusiasm about a better than expected US factory report quickly faded as focus switched to the underlying figures in the report, which triggered concern about the US employment market and inflation.

The euro was bolstered by a stronger than expected report on German retail sales while the yen was also lifted by Japan’s Tankan survey of business sentiment by the Bank of Japan.

While the report came in negative, it came in better than expected, boosting confidence about the outlook for the economy.

The pound made headway against the dollar in early trading, testing the $2 level, but more gloomy economic data on the housing market and manufacturing drained confidence and weakened the pound.

The UK manufacturing PMI fell to 45.8 in June, its lowest since December 2001, while May’s figure was revised downwards to show a contraction.

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