3 August 2001, 16:21  Forex - Major currencies rangebound in London midday ahead of US jobs data

LONDON (AFX) - Major currencies were stuck in narrow ranges against each other in quiet midday trade ahead of the US non-farm payrolls due out at 1.30 pm, dealers said. Having shrugged off the disappointment over the European Central Bank's failure to lower interest rates yesterday, the euro remained on the right side of the 0.88 usd mark but with little upside seen unless the US numbers are particularly weak. "There is too little activity to read anything into the morning's movements," Steve Barrow, economist at Bear Sterns, said. In general, the euro looks reasonably resilient and has come back after the brief dip when the ECB did not reduce rates as hoped. Meanwhile, the euro zone data for the day yielded few leads. Euro zone service sector PMI was stronger than expected, signalling that the manufacturing sector's malaise has not spread too far. In contrast, euro zone first-quarter GDP was revised downwards. But the single currency may yet get a boost from weak US jobless numbers. However, with the market already pricing in a weak reading, it will take a very poor outturn indeed to help the euro rise. Sterling was also steady with little appreciable reaction to yesterday's Bank of England rate cut in evidence. Today's weak service sector PMI reading appeared to justify yesterday's rate cut, Ciaran Barr at Deutche Bank, said. "The headline index dropped by almost 2 points to 50.3 in July, the weakest reading for two and a half years and suggesting that the sector almost stagnated during the month. The Bank of England was said to have received the report in time for its monthly policy meeting over the last two days," he added. Moreover, the detail of the survey is also incredibly soft, with the incoming new business index also the lowest since the beginning of 1999, and outstanding business the weakest since the survey began back in 1996. The survey also found evidence of the "downturn in corporate confidence spilling over into the consumer sector, with demand for personal services reported to have risen at a slower rate". Clearly the current strength of the consumer is on shaky ground, with any significant easing in private consumption growth likely to attract a further monetary policy response from the Bank of England going forward, Barr added.

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