The dollar stayed depressed in the mid-1.29 level against the euro, reflecting a scale-back in US rate hike expectations after the disastrous US jobs report on Friday. "It is clear that the unit is reeling from Friday's startlingly weak non-farm payrolls report and if further economic weakness is evident from the sole US data release of interest over the first half of this week then there is clearly the prospect of an early assault on the 1.30 usd level," said Neil Mellor at Bank of New York. Indeed, the US currency's woes were amplified Friday when it was revealed that the economy created far fewer jobs than expected in May. The sorry state of affairs suggested that US rate setters will hold off hiking interest rates this month, ending at least temporarily, the steady rate hiking cycle which started way back in mid-2004. It faces another test today with the non-manufacturing ISM this afternoon where the consensus is for a slight drop from 63 in April to 60 in May. "High energy prices and weak job data warn that the ISM data might come in weaker," BNP Paribas analysts said. If proven correct, the data will weigh further on the dollar. At the same time, expectations that the European Central Bank will hike interest rates by at least a quarter point this Thursday, if not by 50 basis points, also dented sentiment on the dollar. On the other hand, Steve Pearson at HBOS pointed out that one factor for the euro's sharp gains on the dollar may soon taper away. "In general we maintain the view that the original catalyst for the recent euro rally has been emerging market central bank demand. With reserve accumulation in the emerging world having slowed to a trickle in recent weeks, this bid should gradually dissipate," he said. In the meantime, trading got off to a quiet start, what with most of continental Europe marking public holiday today. But all eyes are on oil prices which have surged dramatically, after Iran warned of disruptions to global energy supplies if it was forced to halt its controversial nuclear program. New York's main contract, light sweet crude for delivery in July, leapt 1.04 usd to 73.37 in electronic pre-open deals. The steep rise raises concerns over the threat to global growth from high oil prices. Later today, attention will fall on appearances by US Fed Chief Ben Bernanke and his ECB counterpart, Jean-Claude Trichet at a conference on monetary policy in the US. Elsewhere, the pound was slightly higher after news that the UK services sector continued to expand at a strong pace in May. The purchasing managers' index of service sector activity in the monthly Chartered Institute of Purchasing and Supply survey dipped to 59.2 in May from 59.7 in April, when it reached its highest level since January 2004, but still came in above expectations. Analysts polled by AFX News had expected the index to fall further to 58.5. "Despite the modest easing back in the business activity index, this is a strong report which points to healthy services sector expansion in the second quarter," said Howard Archer at Global Insight. "Overall, the services sector report will fuel speculation that the Bank of England will raise interest rates before the end of the year, although much will still depend on the strength of consumer spending over the coming months," he added.