Mon, Mar 3 2008, 09:15 GMT
http://www.afxnews.com
LONDON (Thomson Financial) - The euro continued its rise, staying near record levels against the dollar and the pound, ahead of euro zone inflation figures, which are expected to confirm the view that the European Central Bank will leave interest rates unchanged for the time being.
Euro zone HICP inflation is expected to remain at an annual 3.2 pct in February, the same as in January and well above the central bank's 2.0 pct target.
Notably, some forecasters believe the annual rate may tick up to 3.3 pct, which would be a series record.
"Despite the growing evidence of weaker activity, it will be some time before the ECB can relax about the inflation outlook," said analysts at Capital Economics.
Meanwhile, the euro zone PMI for February is expected to be confirmed at 52.3 -- as in the recent preliminary release.
The ECB is due to meet on Thursday, and markets will be examining the wording of its statements for any hints of when rates may start to come lower or how the central bank views the spectacular rise of the euro over the past couple weeks.
Elsewhere, the dollar continued to remain weak as US Federal Reserve policymakers made it clear last week that rates would continue to fall to support growth despite high inflationary pressures.
Data this week, particularly the manufacturing ISM, which is forecast to show a contraction in the sector today, are expected to reinforce the view that the US is already in a recession.
Hans Redeker at BNP Paribas said all of this will keep the euro supported against the dollar in the very near-term before a corrective move lower.
"Risk appetite has been hurt substantially by fear of stagflation in the US," said Redeker.
This has helped lower-yielding currencies like the Japanese yen and Swiss franc as traders undid one-way bets in which they used these currencies for funding.
In the UK, the pound was mixed -- stronger against the dollar but at record low levels against the euro and softer against the yen as well.
The Bank of England is widely expected to keep interest rates unchanged on Thursday because of inflationary pressures.
The UK manufacturing PMI released today is expected to rebound to 51.0 in February after January's sharp fall to 50.6, with price components remaining very strong.
The PMI surveys are closely watched by the BoE rate-setters and will help markets understand how soon they can expect rate cuts this year, with the current consensus being April or May.
London 0845 GMT Hong Kong 0500 GMT
US dollar
yen 102.89 down from yen 103.18
sfr 1.0387 up from sfr 1.0343
Euro
usd 1.5177 down from usd 1.5211
stg 0.7657 down from stg 0.7661
yen 156.51 down from yen 157.05
sfr 1.5760 up from sfr 1.5727
Sterling
usd 1.9819 down from usd 1.9847
yen 203.98 down from yen 204.98
sfr 2.0582 up from sfr 2.0526
Australian dollar
usd 0.9289 down from usd 0.9340
stg 0.4859 up from stg 0.4704
yen 95.64 down from yen 96.44
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