5 November 2001, 12:11 Forex - Euro down in early London trade as investors take profits
LONDON (AFX) - The euro was down against major currencies in early
London trade as investors took profits on long positions ahead of the
European Central Bank meeting on Thursday, dealers said.
They said that the likely weakness of the European service sector
PMI, due out tomorrow, would cast further doubt over the extent of the
European growth outperformance relative to the US and, therefore add to
the negative sentiment.
Steven Pearson, head of currency strategy at Halifax Treasury Group
said: "The dollar is reasserting itself having gone over the formidable
hurdles it faced last week in the form of the weak economic data."
He noted the market had positioned itself short of dollars versus
the euro.
"The positioning is manifesting itself with this morning's price
action," he said.
Meanwhile in the UK, sterling consolidated a touch firmer against
most majors ahead of the release of the industrial and manufacturing
output for September, due at 9.30 am.
Both are expected to register month-on-month as well as
year-on-year falls based on survey evidence so far.
"Consolidation is now necessary. Sterling is looking a bit
overbought," said Pearson.
The strategist is confident sterling will fare well against the
euro this week.
"Firstly, the positioning backdrop suggests that the market is
short sterling against the euro. Secondly, the MSCI benchmark is also
expected to support sterling against the euro and the Monetary Policy
Committee is more likely to win points for credibility this week than
the European Central Bank," he said
This, combined with Chancellor of the Exchequer Gordon Brown's
comments at the Confederation of British Industry conference, which
shifted back the EMU debate, would tend to push the euro/sterling pair
lower, he said.
"It looks increasingly unlikely that EMU is going to be a
short-term negative for sterling," he added.
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