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Dollar rises; ECB rate cut outlook hits euro

The dollar rose on Monday after US manufacturing data pointed to economic growth, while the euro was under pressure from expectations of an ECB interest rate cut.

NEW YORK: The dollar rose on Monday after US manufacturing data pointed to economic growth, while the euro was under pressure from expectations of an ECB interest rate cut.

The greenback pushed higher as traders weighed an upward correction to US manufacturing activity in May by the Institute for Supply Management.

ISM said a software error caused it to report a slowdown. It corrected the data to show its purchasing managers index rose to 55.4 from 54.9 in April, rather than slowing to 53.2 as it first reported.

Meanwhile, inflation in Germany, Europe's biggest economy, slowed to its lowest rate in four years in May, at 0.9 percent, compared with 1.3 percent in April, according to preliminary government data.

The sharp fall added to pressure on the European Central Bank, which holds a monetary policy meeting on Thursday, to act to keep the 18-nation bloc from falling into deflation, analysts said.

ECB watchers predicted a cut in the central bank's key interest rates and possibly new measures to pump liquidity into the banking system.

"While the ECB looks set to cut interest rates and offer some lending incentives this week, we think much more will be needed to eradicate the risk of deflation," said Capital Economics.

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