LONDON, June 7 — The euro was headed for its best week since September today, largely due to weakness in the dollar which could fall later in the day if US jobs data disappoints.
US non-farm payrolls data for May due out at 1230 GMT are expected to show a drop in hiring which, investors say, could bolster the case for a Federal Reserve interest rate cut this year.
The prospects of the Fed reacting to an escalating China-US trade row by cutting rates has dragged the dollar to a two-month low this week and helped the euro rise above US$1.13 (RM4.70).
The dollar was marginally up on the day but still headed for its worst week since March.
The euro, meanwhile, relinquished all its gains from yesterday after a policy review by the European Central Bank that was less dovish than expected.
It was down 0.1 per cent to US$1.1269 but still set for a weekly gain of 0.9 per cent, its best weekly performance against the dollar since late September last year.
“The NFP series, more than most, tends to hold up until it falls off the edge of a cliff, and that cliff is getting closer,” said Societe Generale strategist Kit Juckes.
A slowdown in the US labour market was evident in a worse-than-expected ADP National Employment Report released on Wednesday.
Others were more sanguine about the dollar’s prospects.
“I believe the market’s assumption that the Fed is going to cut interest rates soon is premature. For now, the Fed can afford to remain patient,” said Marshall Gittler, an analyst at ACLS Global.
“I would expect the dollar to recover over the medium term, although it may take some time before people realize that a rate cut is not imminent.”
The ECB yesterday ruled out raising rates in the next year and even opened the door to buying more bonds as a global trade war and Brexit drag the euro zone economy down.
But the market been expecting a stronger hint of a rate cut, and consequently the euro and euro zone bond yields rose, putting more pressure on the dollar.
Against a basket of six other currencies, the dollar was steady at 97.115, trading about 0.3 per cent above Wednesday’s eight-week low of 96.749.
The index was on course for a 0.72 per cent loss this week, its worst weekly performance since the week of March 15, when it gave up 0.73 per cent. — Reuters
Source: The Malay Mail Online