LONDON (AFX) - The euro weakened in early trade ahead of this morning's euro zone M3 money supply growth figures which will provide a pointer to the European Central Bank's interest rate decision on Thursday, dealers said.
"M3 from the euro zone is the big number today, and people will be looking at that to see whether the ECB will cut rates, as expected, on Thursday," Halifax economist Steven Pearson said.
"A strong number would be taken negatively in terms of the interest rate outlook and negatively for the euro in the currency markets," he said.
According to economists polled by AFX news, year on year M3 growth in July will come in at 6.1-6.2 pct, compared with 6.1 pct in June. However the three month moving average is seen accelerating to 5.8 pct in May-July from 5.3 pct in April-June.
Dealers said the euro's recent rally against the dollar appears to have run out of steam.
"Euro/dollar weakened overnight amid talk that today's Euroland M3 number will be strong," GNI's Peter Osler said.
WestLB's Michael Klawitter noted that the euro's recent strength has been "solely driven higher bu dollar-negative gactors and not by genuine euro-positive news, which makes the euro vulnerable to any stabilisation in the US economic outlook".
He added, "With the market pricing in a 25 basis point ECB rate cut this Thursday, any disappointment from this side would add to the downward pressure on eur-usd."
In the UK, dealers said sterling could move lower on the back of a recovery in the dollar, but should make up ground against the euro. Elsewhere, they noted that the yen remains relatively well supported due to capital repatriation by Japanese corporates.
"Finance minister (Masajuro) Shiokawa's comments that the G7 action following the group's meeting in late September may lead to a weaker yen are not yet seriously discussed in the market," Klawitter said.
In the US, investors will be watching today's August consumer confidence data and a second-quarter GDP revision due Wednesday.