Dollar trades near one week low against euro

Pound:
Sterling rose versus the dollar yesterday as better than expected global economic data supported riskier currencies. Figures also showed British manufacturing appeared to be stabilising as orders from Germany and China picked up, with the purchasing managers' index rising to 49.6 last month from 47.7 in November, beating expectations for 47.4. However, analysts said the survey would not alter the view that the UK is likely to slip into another recession. Over the fourth quarter as a whole it showed manufacturing recorded its worst performance since the second quarter of 2009. Sterling was up 0.9 percent versus the dollar at $1.5653, with traders citing demand at the 1600 GMT fix when the Bank of England sets a reference rate. It extended gains after reported stop-loss orders were triggered on the break above $1.5600.
Data 09.30: Construction PMI.

Euro:
Tomorrow, the spotlight turns to a pair of bond auctions in Germany and Portugal. Berlin will sell €10 billion in 10-year paper while Lisbon will offer €1 billion in 105-day bills. Traders will keep a close eye on average yield levels and bid-to-cover readings – a measure of demand – to get a sense of sovereign solvency fears in the region as Eurozone countries face the need to refinance a whopping €157 billion in maturing debtjust in the first three months 2012. On the data front, the preliminary estimate of December’s Euro Zone CPI reading headlines the docket, with expectations calling for the annual inflation rate to drop to a four-month low at 2.8 percent. The result may bolster expectations that the European Central Bank will reduce benchmark interest rates or introduce new non-standard easing measures to head off fears of a credit crunch and stoke sagging economic growth, weighing on the Euro.
Data 10.00: CPI Flash Estimate y/y.

Dollar:
The dollar traded 0.3 percent from its lowest level in a week versus the euro before reports forecast to show orders at U.S. factories grew and the nation’s services industry expanded, damping demand for safer assets. The greenback yesterday slid versus all of its most-traded peers as reports this week showed manufacturing in the U.S. and China improved in December, suggesting production is weathering strains from Europe’s debt crisis. The dollar is currently trading at $1.3065 per euro after dropping 0.9 percent to $1.3050 yesterday, when it fell as low as $1.3077, the weakest since Dec. 28. Data from the U.S. Commerce Department due today may indicate bookings for factory goods climbed 2 percent in November after a 0.4 percent drop the previous month.
Data 15.00: Factory Orders m/m.

General:
•    The Australian and New Zealand dollars snapped four-day gains, as Europe’s bailout fund plans to sell three-year bonds amid concern the region’s biggest economies may lose their top credit ratings. The so-called Aussie weakened versus most of its 16 major counterparts before Germany, Portugal and France auction bonds today and tomorrow. New Zealand’s currency failed to extend a two-day advance against the yen amid speculation a slowdown in Europe will weigh on growth prospects for the global economy.

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