25 June 2001, 14:03 Forex: Euro slightly higher in early London trade on U.S. recession fears
LONDON (AFX) - The euro was slightly higher in early morning trade
on the back of concerns over U.S. growth and weaker-than-expected
German producer price data, dealers said.
They said reports from the U.S. National Bureau of Economic
Research saying that the U.S. may already have stumbled into its first
recession in a decade, served to undermine the dollar.
"It is more a dollar story than a euro one and the NBER report
could be weighing on the dollar, benefiting the euro," Neil Parker, a
currency strategist at Royal Bank of Scotland said.
"It is also benefiting from today's weak German PPI. People were
expecting a year-on-year rise of as high as 5 pct but it came in at 4.6
pct," he added.
"Tomorrow we have U.S. durable goods orders but the series is too
erratic for the market to pay much attention to it," Parker said.
Michael Klawitter, a currency strategist at West LB, said that the
euro should remain supported by some dollar negative sentiment this
week and that today's German PPI data confirmed the market view that
euro-zone inflation peaked in May, allowing the ECB to cut rates in
July.
"The release of weak U.S. durable goods orders (Tuesday) should
also support a more cautious tone (towards the dollar) given that the
U.S. NBER has now officially indicated the possibility that a U.S.
recession may have begun," Klawitter added.
Sterling was slightly higher leaving economists somewhat puzzled.
"There were stories in the press about the euro debate being back
on so I'm surprised that it's stronger," Parker at RBS said.
Klawitter at West LB said that upward pressure in euro-dollar will
keep the risk in euro-sterling to the upside though in a narrow range.
"Selling pressure in Vodafone adds to the risk that euro-sterling
will move higher," he added.
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