LONDON (AFX) - The euro was weaker in early trade on the growing view that the European Central Bank will today postpone a rate cut until its April 11 meeting.
"It is a very close call but I think that they will wait until April 11," Halifax economist Steven Pearson said.
"The euro zone M3 data came out surprisingly strong, and the timing was also surprising. They could have waited until after today's ECB meeting as that number usually comes out on the last Friday of the month. I just wonder if they're perhaps trying to send a signal that a cut might be delayed for a fortnight in order to establish a consensus on the ECB governing council," he said.
GNI economists agreed that a cut today is now looking less likely. "While ECB officials have recently been paving the way for a cut in rates, it is not expected to come today," they said in a research note.
Dealers predicted the euro will initially rise and then fall if the ECB makes a surprise decision to cut, but that it would weaken sharply if rates are unchanged.
"I think we're now targeting 0.8750 usd over the next month or couple of weeks. Basically, that's the final retracing of the rally we saw late last year and in early January," Halifax's Pearson said. Dealers said the yen was weaker following yesterday's final deadline for year-end repatriation and on weaker Japanese share prices.
"I think the dollar's heading back up towards 124 yen, so the dollar's having a pretty good day of it," Pearson said.