The euro edged lower versus the dollar in early London trade as the German Ifo business indicator confirmed that conditions are not improving. Economists said the decline in the Ifo would boost expectations of an interest rate cut before year-end. Dealers said that the Ifo business climate indicator, EU Commission business and consumer surveys and purchasing managers' indices for the manufacturing sector all suggest that there was little hope for an improvement in the near-term.
However, some analysts have expressed doubt as to whether the ECB will cut rates in November, due to recent controversies about the stability and growth pact, adding to market uncertainty. Separately, a stronger-than-expected euro area M3 did not help the case for a rate cut, she added. M3 grew 7.4pc year-on-year in September, above forecasts for a drop to 6.7pc, while the three month moving average of M3 year-on-year growth rate was 7.1pc higher than the 6.9pc decline forecast.
As for the dollar, press reports over the weekend suggested a strong possibility of a Fed rate cut by year-end. //www.fxcentre.com