LONDON (AFX) - The euro was slightly firmer in early trade after corporate buying yesterday was thought to have given a fillip to the single currency, dealers said.
Dealers said the news that Deutsche Telekom and France Telecom are to sell their stakes in Sprint could have been behind the euro's rise of more than half a cent against the dollar.
But they said the single currency's rally was unconvincing and would prove shortlived.
"Although euro-dollar recovered above 0.88 usd, we keep the view that the downside risk remains dominant," WestLB economists said. They said that a benign U.S. consumer price index for April has fuelled market optimism that the Federal Reserve will continue to cut interest rates and that the U.S. economy will finally turn the corner.
"Without any key data on the horizon, this kind of market view is likely to persist, which will hardly allow euro-dollar to move much higher," the economists said in a research note.
4Cast currency strategist Paul Bednarczyk said yesterday's rise in U.S. equities will support the dollar, although he does not expect great movement today.
He was sceptical that news that Deutsche Telekom and France Telecom are to sell stakes in Sprint could have been behind the euro's rise yesterday.
"For want of any clear explanation, people are just going with that theory, but it sounds a bit dodgy to me," Bednarczyk said.
Dealers said today's release of the European Central Bank monthly report could contain the corrected M3 figures that were held to be influential in convincing the bank to cut rates unexpectedly last week.
In the UK, sterling tracked the euro slightly higher ahead of the release of April retail sales figures.
Sales volumes are expected to have risen a seasonally adjusted 0.3 pct from March and 5.3 pct year-on-year, according to the median of 18 analysts' forecasts compiled by AFX News.
Dealers interpreted yesterday's Bank of England quarterly inflation report and comments from deputy governor Mervyn King as pointing to another rate cut before long.