Forex - Euro slighlty weaker ahead of key inflation, unemployment figures

Forex - Euro slighlty weaker ahead of key inflation, unemployment figures

	Published : Tue, 31 Jul 2007 09:32 By : Agencies Print this Story

LONDON (Thomson Financial) - The euro was slightly weaker against the dollar ahead of a raft of euro zone data, with the recent rise in risk appetite still driving movements in the major currencies.

The release of inflation figures for the 13-nation single currency zone this morning, along with unemployment and business sentiment indicators, will provide the market with evidence of whether the activity in the economy is continuing to pick up or not.

The flash estimate for the annual rate of inflation in July is expected to remain unchanged from June at 1.9 pct, while unemployment is seen moderating slightly to 6.9 pct in June from 7 pct in May.

German retail sales figures released earlier came in softer than expected, suggesting consumer activity may be slowing. Retail sales rose 0.7 pct between between May and June - well below the 1.7 pct expected.

Stuart Bennett, euro zone economist at Calyon, said the figures mean second quarter German GDP could come in weaker than expected.

However, the euro moved little on the figures, indicating that currencies are still being driven by fears of a credit crunch caused by the troubled US subprime sector.

'Despite the fact that there is a large amount of euro zone data out today, forex flows are being driven by the mood of the equity and bond market,' said John Noonan at Thomson IFR Markets.

'If the markets continue to steady it will underpin the euro against the dollar and yen, but if credit crunch concerns return it will weigh on the euro,' he added.

The US is also set for a busy day on the data front, with the release of the core PCE price index for June, the July Chicago PMI survey and the Conference Board's July consumer confidence index.

The annual rise in the core PCE index is expected to have remained unchanged from June at 1.9 pct while the Chicago PMI is seen coming off last month's high of 60.2.

Gavin Friend, currency strategist at Commerzbank said if the numbers turn out as expected, the dollar is 'unlikely to get support from the fundamental side' today.

But he added that tomorrow's release of the ISM index and the employment report on Friday may have the capacity to 'generate market interest that starts to rival currency subprime/credit market and carry trade woes'.

Meanwhile the yen was steady, coming off earlier highs, as investors began profit taking from the currency's gains over the past week.

Finally the pound was down, having climbed back above 2.03 usd in Asian trade, ahead of key retail and consumer sentiment surveys.

The Confederation of British Industry's distributive trades survey is expected to show retail activity slowed in July, hit by the poor UK summer, with the GfK consumer confidence reading also seen down.

David Jones, chief market analyst at CMC Markets said the figures will be closely watched 'as the market looks once more for any suggestion as to just how aggressive the Bank of England will be with monetary policy during the latter part of the year'.

The BoE's Monetary Policy Committee meets later this week to set interest rates, but is expected to leave them unchanged at 5.75 pct.

London 0905 BST Sydney 0509 BST

US dollar

yen 119.02 up from 118.93

sfr 1.2037 up from 1.2030

Euro

usd 1.3705 down from 1.3715

yen 163.17 up from 163.11

sfr 1.6500 up from 1.6499

stg 0.6756 up from 0.6751

Sterling

usd 2.0286 down from 2.0323

yen 241.51 down from 241.65

sfr 2.4416 down from 2.4451

Australian dollar

usd 0.8606 down from 0.8609

stg 0.4241 up from 0.4134

yen 102.45 up from 102.35

rachel.armstrong@thomson.com

rar/slm

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