Thursday May 4, 2006 - 09:56:09 GMT
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INVESTICA Ltd - www.investica.co.uk
Euro waits for ECB stance
The dollar found some support weaker than 1.2650 against the Euro on Wednesday with two-way market interest above 1.2630 and the Euro drifted slightly weaker to 1.2580 in early Europe on Thursday.
The US data was stronger than expected with an increase in the ISM services-sector index to 63.0 in April from 60.5 the previous month. There were firm readings for the employment, orders and prices components while factory orders rose 4.2% in March.
The firm data should support confidence over the Friday payroll report, but dollar sentiment will remain weak with further concerns over structural weaknesses. Weak confidence will also ensure dollar selling interest on any significant rallies.
Markets will watch closely the ECB monthly interest rate decision and press conference on Thursday. The Euro will spike higher, at least temporarily, if there is an interest rate increase, although it appears more likely that the bank will lay the foundations for a June increase. A tough ECB monetary stance will underpin the Euro, but the currency will be vulnerable if the bank voices concerns over the Euroâ€™s level. The net risks suggest some Euro retracement is realistic ahead of the Friday payroll report. The Euro-zone PMI index for the services sector increased marginally to 58.3 in April from 58.2.
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