27 March 2001, 16:00 Forex: Euro stable in midday London trade; all eyes on key U.S. economic data
LONDON (AFX) - The euro was stable in midday trade, holding onto
earlier gains ahead of two key U.S. economic indicators and a speech by
the Federal Reserve chairman Alan Greenspan to the National Association
of Business Economists, dealers said.
Daragh Maher, chief economist at ING Barings, said the
strengthening of the euro was "a modest move."
"It's consolidating yesterday's move. For the moment the safe haven
dollar status is holding. A big strengthening of the euro will be
unsustainable if it just drifts on no significant news," Maher said
also pointing to hopes of a rate cut from the ECB.
"The markets are rewarding action, i.e the Federal Reserve cut, and
any sustainable rise in the euro would be dependent on U.S. growth
falling severely," he said.
Dresdner Kleinwort Wasserstein strategist Paul Mackel said:
"Players are clearly sitting on the sidelines until key U.S. data and
Greenspan speech this afternoon."
"These will give further direction for the currencies," Mackel
said.
Analysts said, U.S. February durable goods orders data and the
consumer confidence survey for March scheduled for release at 2.30 pm
and 4.00 pm respectively will throw some light over the pace of the
economy.
He said consumer confidence will elucidate whether or not there
could be an inter-meeting rate cut from the Fed.
"If weaker than market expectations the consumer confidence will
add some pressure to the Fed to be more aggressive in their stance,"
Mackel said.
Analysts expect the consumer confidence to fall to 104 from 106.8
and durable goods order to show a rise of 0.5 pct on the month.
All other currencies have been trading within narrow ranges,
dealers said, adding that there had been very little flows.
"Liquidity is bad at the moment," said Mackel.
Commenting on the European Central Bank upcoming meeting, Mackel
said: "Here is an opportunity for the ECB to get a favourable market
sentiment by being pro-active."
"If they hold off it'll pressure the euro in the short term."
Commenting on the weaker yen Maher said the Japanses Ministry of
Finance was comfortable with the weaker yen as is the U.S. Treasury as
long as Japan is sorting out its problems.
"Domestic policies such as the Bank of Japan cutting rates and
quantitative easing(BoJ increased banks' reserves to inject liquidity),
are also serving to weaker the currency," Maher said adding that the
fall in the Nikkei was also playing its part.
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