Euro and sterling weaker versus dollar; ECB, BOE in focus

The US dollar remains firm against both the euro and sterling on Monday as downside risks in Europe and UK have increased considerably especially ahead of the European Central Bank and Bank of England policy meeting later this week.

 

Disappointing data out of the Euro zone today as well as from the UK should continue to fuel expectations of further easing by the two central banks. A diverging outlook between the dovish ECB and BoE and the more neutral Fed should underpin the dollar outperformance.

 

Sterling briefly dipped below the key $1.50 level after disappointing data on Markit/CIPS Construction Purchasing Managers’ Index (PMI).  Output in the construction sector fell at the fastest pace in more than three years in February.

 

The euro fell below the key $1.30 level after disappointing data that showed euro zone investor confidence fell in March. Meanwhile today, investors are also focused on a meeting of euro-zone finance ministers holding a Eurogroup meeting in Brussels. Discussions on Italy will be high on the agenda as well as a bailout for Cyprus.

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