LONDON (AFX) - The euro was firmer around key support levels in midday trade ahead of this afternoon's U.S. NAPM data for March, dealers said.
Dealers said one factor dampening activity is the expectation of the NAPM report, due at 3.00 pm.
Consensus is for a rise to 42.2 in March following the increase to 41.9 in February from January's 41.2.
Steve Hannah, chief economist at National Australia Bank, said: "The market is a little bit concerned that the report might turn out very weak, in which case, the dollar might not be able to push through these fairly important levels."
He said the market was reluctant to breach key support level until the position on whether the European Central Bank is going to cut rates within the next weeks becomes clearer.
"The evidence this morning in terms of the economic data suggest that there is increasing pressure to reduce interest rates. But at this stage, there is a little bit of an open question as to what reaction will actually be forthcoming from the central bank," Hannah said.
Some economists believe that a 25 basis point cut by the ECB was so much talked about that it will not have any impact in encouraging the currency to recover.
Trading activity on the yen/dollar was said to have been low. "Again, there is an element of fragility there because the yen was significantly undermined this morning by the weakness of the Tankan report," Hannah said, adding that "there is a general feeling that the dollar will remain very strong against both the euro and the yen for the near term".
Sterling fared slightly better against the dollar as it managed to break above the 1.42 usd level.
"I think people see the way clearing to a 25 basis point rate cut on Thursday from the UK. It sets us apart a little bit from the euro zone where there is still a lot of uncertainty about what the ECB's intentions are," Hannah said.
"Again the economic evidence from the CIPS survey was that the UK manufacturing sector has weakened quite sharply but on balance the market is prepared to accept that this might prove to be a temporary state of affairs and that the MPC is more likely to support growth then its euro zone counterparts," he said.
UK CIPS March manufacturing index fell to 49.7 vs revised 52.2 in February.