Weak Ifo reading caps the euro's advance
By Jennifer Hughes in London
Published: April 28 2003 10:33 | Last Updated: April 28 2003 10:33
The dollar remained under pressure on Monday as investors looked ahead to a heavy calendar
of US data and a speech by Alan Greenspan, chairman of the Federal Reserve. The euro,
however lost a little of its shine after a German sentiment survey unexpectedly weakened.
The single currency was at $1.101 against the dollar by mid-morning in Europe, having risen to
$1.107 in early European trade before the closely-watched Ifo survey capped euro gains.
The Ifo Institute's April business sentiment index fell to 86.6 from 88.1, disappointing market
expectations for a slight rise following a bounce in a rival survey earlier in the month.
"The data reinforced the view of a weak economy rather than providing the market with anything
new," said Kamal Sharma, currencies strategist at Commerzbank.
But the dollar failed to make much headway as investors awaited a series of US data to be
released this week which will be made more significant still by the proximity of the Federal
Reserve's policy meeting on May 6.
"US fundamentals may intermittently be looking a little more dollar friendly, but the mood of the
market is still one of selling dollar rallies," said Chris Furness, senior currencies strategist at
4Cast economic consultancy.
Mr Furness added that "real money" investors - those investing larger amounts for the longer
term - would hope to buy the euro on dips to around $1.07 but were prepared to buy if the single
currency broke through $1.11. The euro reached a four-month high at $1.1084 in early March.
The most closely-watched event this week will be the appearance of Alan Greenspan, chairman
of the Federal Reserve, before the House financial services committee on Wednesday.
A series of weak numbers, notably unexpectedly weak gross domestic product growth in the
first quarter, has raised speculation of the likelihood of a rate cut or, at least, a shift to an easing
bias.
US data this week include consumer confidence on Tuesday which is expected to show a
bounce following a rise in the University of Michigan's survey last week.
There is potential for more gloom, however, on Thursday with the release of the Institute for
Supply Management's April manufacturing activity index and on Friday with the publication of the
employment report. Strategists have forecast a sixth drop in payrolls in eight months after a
gloomy report in the Fed's Beige Book survey last week and rising jobless benefit claims.
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