FOREX-Euro shakes off Italy comment ahead of U.S. jobs
Friday, June 3, 2005 11:52:37 AM
reuters.com
(Updates prices, adds fresh quotes, European policymaker comments)
By Carolyn Cohn
LONDON, June 3 (Reuters) - The euro edged further above this week's eight-month lows against the dollar ahead of key U.S. jobs data on Friday, after stumbling when an Italian government minister said Italy should consider leaving the single currency.
U.S. non-farm payrolls data for May will be crucial in gauging the future path of U.S. interest rates, and may turn the spotlight back to the U.S. after a euro-focused week, analysts said.
The euro lost as much as three percent after this week's rejection of the European Union constitution by two of the bloc's founder members, France and the Netherlands.
Underlining concerns about prospects for political and economic stability in Europe, the euro fell steeply but briefly after euro-sceptic Italian Welfare Minister Roberto Maroni said Italy should leave the euro zone and reintroduce the lira.
"The market reacted very sharply this morning -- the market remains on tenterhooks for any negative news about the euro," said Mitul Kotecha, head of global foreign exchange research at Calyon.
"If the payroll numbers are good we might get a bit more dollar upside today, but moves are likely to be at a slower pace than we have seen this week." At 1138 GMT, the euro was steady on the day at $1.2283 <EUR=>, more than a cent above an eight-month low set on Wednesday.
The dollar was down more than a third of a percent versus the Japanese currency, at 107.90 yen <JPY=>, in profit-taking ahead of the U.S. data.
The euro was little moved by data showing the euro zone service sector grew at its fastest pace in seven months in May. The NTC Research Business Activity Index rose to 53.5 from April's 52.8.
LABOUR DAY
Investors were cautious ahead of U.S. labour market data at 1230 GMT, expected to show 185,000 jobs were created in May, compared with April's unexpectedly high 274,000 figure.
Solid jobs growth would likely support expectations that the Fed will keep raising U.S. rates which stand at 3 percent after eight consecutive rises in the past year.
The ECB kept rates at 2 percent on Thursday, rejecting calls for a cut to help reverse the economic slowdown in Europe.
But investors were nervous as some major banks are looking for a below-consensus reading in U.S. jobs, and the employment data has often come in well away from the consensus forecast in recent months.
IN SEARCH OF LOST LIRA
The euro briefly lost about two thirds of a U.S. cent on Friday after a newspaper article in which Italian Minister Maroni said Italy should hold a referendum to decide whether to return to the lira, at least temporarily.
Maroni is a front-line minister but is a member of the euro-sceptical Northern League party and his views are not believed to be shared by Prime Minister Silvio Berlusconi or Economy Minister Domenico Siniscalco.
Maroni also said that European Central Bank President Jean-Claude Trichet was one of the people chiefly responsible for the "disaster of the euro".
The idea that European economic and monetary union could fail reared its head for the first time for years this week, after weekly magazine Stern said a possible failure of the project was discussed at a meeting attended by German Finance Minister Hans Eichel, Bundesbank President Axel Weber and investment bank economists.
The report prompted the German central bank to issue a statement ruling out any failure.
European Monetary Affairs Commissioner Joaquin Almunia and European Central Bank officials Guy Quaden and Otmar Issing also rushed on Friday to crush any talk of EMU break-up.
Luxembourg Prime Minister Jean-Claude Juncker, who holds the EU presidency, said on Friday he would resign if Luxembourg voted against the EU constitution on July 10. He also said the euro was still overvalued compared to the dollar.
"There is a greater risk premium attached to the euro now than a week ago before the referendums," said Marvin Barth, global currency economist at Citigroup.
Elsewhere, investors are looking to next weekend's G7 finance ministers meeting in London and whether there will be further pressure on China to revalue its currency.
Speculation about a possible revaluation of the yuan has been a key factor for currency markets in recent months. |
