- POSTED: 05 Jun 2014 05:59
The dollar rose against the euro on Wednesday after encouraging US economic news and as investors braced for a European Central Bank monetary policy meeting.
NEW YORK: The dollar rose against the euro on Wednesday after encouraging US economic news and as investors braced for a European Central Bank monetary policy meeting.
The dollar gained support after the Institute for Supply Management said activity in the services sector, accounting for 80 per cent of the US economy, surged in May.
The US Federal Reserve's "Beige Book" report was generally positive, saying all 12 districts of the country saw increasing economic activity in recent weeks.
"The dollar extended its gains after the relatively upbeat Beige Book report that validated the improvements that we saw in the ISM index," said Kathy Lien of BK Asset Management.
The ECB is nearly universally expected to cut interest rates to historic lows to fight off the threat of deflation in the 18-nation eurozone as growth falters.
Official data Tuesday showed eurozone inflation slowed sharply to 0.5 per cent in May, from 0.7 per cent in April and far weaker than the ECB's target of just below 2.0 per cent.
All eyes will be on the ECB president, Mario Draghi, in a post-meeting conference. In addition to rate cuts, there is speculation that he could introduce a number of unconventional measures, such as lowering the deposit rate to negative levels and launch asset purchases, known as quantitative easing.
"The euro could actually bounce after the ECB rate decision if the central bank refrains from signaling plans to follow the move with quantitative easing," Lien said.
The Bank of England, meanwhile, was expected to keep its main interest rate at a record-low 0.50 per cent at its meeting on Thursday.