26 October 2001, 12:03  Forex - Euro steady in early London trade ahead of euro zone M3 data

LONDON (FWN) - The euro was largely unchanged from afternoon Tokyo levels in early London trade, ahead of euro zone M3 data due out later this morning, dealers said. They said the data would be looked at very carefully after the ECB's decision yesterday to keep rates on hold and in light of Bundesbank president and ECB council member Ernst Welteke's statements that insufficient conditions exist for a rate cut. "The dollar is likely to continue recovering as suggested by the strong bounce back in the equity markets, but not significantly before today's final reading of the Michigan October confidence measure and September new home sales, which are likely to be worse than yesterday's data because of the bigger commitment required by buyers," Richard Grace, a currency strategist at West LB said. "Expect a further mild correction in the recent gains of the dollar which will mean some further upside for the euro, sterling and yen," he added. "Today the euro is likely to hold onto the gains (made yesterday) and grind higher," Grace said. "Datawise we have euro zone M3 figures for September, which are set to remain on the strong side as investors moved out of equities and into cash during that month. If the euro is sold on the release of these figures, we suggest participants buy euro-dollar on dips ahead of the US data and the eventual cut in rates by the ECB on November 8," he added. Daragh Maher, senior economist at ING Barings said: "We had most of the excitement yesterday and the ECB has been downplaying the significance of recent increases in M3 but it will still have some psychological influence." Sterling was marginally stronger in early trade ahead of UK GDP data. "UK Q3 GDP will be out soon and there is a good chance that the numbers will be better than expected," Maher at ING Barings said

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