LONDON: The dollar wilted against the euro yesterday ahead of an expected Federal Reserve decision to leave US interest rates on hold and on news that US consumer spending cooled in June.
The single European currency in late European trade was at 1.5570 dollars against 1.5555 late Friday in New York. The dollar rose against the yen, trading at 107.99 after 107.68 on Friday.
The Federal Reserve will issue its rate decision today, followed by the European Central Bank and the Bank of England on Thursday. All three are expected to leave rates on hold as they grapple with rising inflationary pressures at a time when economic growth is slowing. “A shift in the current monetary stance is likely to be a story for 2009 rather than 2008,” said analyst Derek Halpenny of Bank of Tokyo-Mitsubishi. Analysts at Barclays Capital said they were “in line with the consensus in expecting policy rates to be left on hold.” They added that an accompanying statement from the Fed was likely to show that US policymakers might be more open to lowering rates in the future than their counterparts at the ECB.
The dollar was also affected yesterday by a government report that US consumer spending had eased in June, when inflationary pressures accelerated strongly in the face of higher food and energy costs.
Elsewhere, the pound was under pressure as investors took stock of a rapidly weakening British economy. The pound was reacting to weaker-than-expected British construction data and a report in the Independent on Sunday that mortgage specialist Halifax would disclose an annual fall in house prices of over 10 percent when it announces its latest monthly survey this week. Meanwhile, Europe’s main stock markets closed lower yesterday.
In London, the FTSE 100 index shed 0.64 percent to end at 5,320.20, in Paris the CAC-40 lost 0.78 percent to close at 4,280.63 while in Frankfurt the DAX fell 0.73 percent to finish at 6,349.81.
The Euro Stoxx 50 index of leading euro zone shares weakened by 0.82 percent to stand at 3,289.26 points. The European single currency was at 1.5580 dollars. In New York, The Dow Jones Industrial Average fell 0.78 percent to 11,237.98 in midday trade and the tech-heavy Nasdaq composite dropped 1.10 percent to 2,285.59. The broad-market Standard & Poor’s 500 index slid 0.81 percent to 1,250.10. In Asia yesterday, Tokyo’s benchmark Nikkei-225 index slid 1.3 percent to 12,933.18 points, which was the lowest close since July 18.