EU focus: Euro fell after weak statictic; focus on ECB and BOE
05.05.2011, 10:50

EU focus: Euro fell after weak statictic; focus on ECB and BOE

The euro dragged lower on release of much weaker than expected German mfg orders data (-4.0% m/m versus medisn +0.4%).
Earlier rate hovered near a 17-month high against a struggling dollar on Thursday as investors looked for the European Central Bank to reinforce expectations of higher rates after its policy meeting later in the day.
Markets are waiting to see if the ECB chief Jean-Claude Trichet will use the "strong vigilance" code words to signal a follow-up rate rise in June to the initial move in April as central bank steps up its fight against inflation. Traders said that if Trichet repeats the phrase, the euro would push back above $1.49.

The Bank of England rate decision is due today too. Analysts expect the MPC will leave policy on hold at this meeting. Analysts' median forecast is for Bank Rate to rise from its current 0.5% to 1.0% by year end, with the first hike coming in the third quarter. Interestingly, this is MPC member Andrew Sentance's last meeting before being replaced by ex-Goldman Sachs UK economist Ben Broadbent in June.
The Australian dollar took a brief hit after data showing retail sales fell in March and were flat in the first quarter, indicating that higher interest rates were keeping consumers cautious even as the resource sector booms.
But the data did little to shake views that the Australian central bank would resume lifting rates in coming months as core inflation shows signs of heating up. Earlier this week, the Reserve Bank of Australia said underlying inflation was likely to head higher, laying the gourndwork for further tightening.



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