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Dollar slips vs. euro after dim US economic data

The dollar slipped against the euro after dreary data on the US economy this week had traders expecting the Federal Reserve will keep ultra-low interest rates well into 2015.

NEW YORK: The dollar slipped against the euro on Friday after dreary data on the US economy this week had traders expecting the Federal Reserve will keep ultra-low interest rates well into 2015.

On Thursday US consumer spending data for May showed a mere 0.2 per cent increase from April, but adjusted for inflation, spending actually fell 0.1 per cent.

News of the weakness in consumer spending, the main driver of the US economy, came a day after the government slashed its first-quarter gross domestic product estimate, to a sharp 2.9 per cent economic contraction.

"The GDP report, then yesterday's softer than expected spending figures, will do little to pressure Fed officials to begin raising borrowing costs any time before mid-2015," said Omer Esiner of Commonwealth Foreign Exchange.

Kathy Lien of BK Asset Management noted that most market participants did not expect the Fed to raise interest rates until the second half of 2015. "But after this week's reports, the odds of a rate hike in June 2015 fell to 50 per cent from 60 per cent a week ago."

Forex traders awaited the European Central Bank's next monetary policy meeting on Thursday. Earlier this month the ECB took unprecedented actions to bolster growth and prevent deflation in the Eurozone.

"While the euro has clearly been stabilizing this past week, we do not expect the common currency to develop very strong upside momentum in the next few days, especially ahead of the ECB meeting next week," said Vasileios Gkionakis of UniCredit.

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