The dollar remained close to its all-time low against the euro but was trading in a narrow range ahead of US fourth quarter GDP figures.
The dollar has been in the doldrums this week following a series of weak US data and a downbeat assessment of the economy's prospects from Federal Reserve chairman Ben Bernanke yesterday. This all combined to reinforce expectations that US interest rates will be cut by 50 basis points at the Fed's next monetary policy meeting in March, sending the euro to an all-time high yesterday afternoon of 1.5143 usd.
The US economic outlook has been bleak for some time, but a reasonable week for equity markets coupled with firmer-than-expected euro zone data meant the greenback hasn't benefited from the safe-haven flows seen in recent weeks when equity market turmoil and fears of a global economic slowdown prompted investors to switch out of risky assets and into dollars.
'Although the growth outlook remains challenging globally and equity markets are well off their highs from the third quarter of last year, a substantial easing in market tension and more orderly corrections is contributing to better growth sentiment,' said Geoffrey Yu, currency strategist at UBS. (NYSE:UBS)
This afternoon sees the release of fourth quarter US GDP figures which analysts expected to show a 0.7 pct quarter-on-quarter rise. Ahead of this comes the weekly jobless claims numbers, with the number of people filing for unemployment insurance for the first time expected last week to edge up to 350,000 from 349,000 a week earlier.
'With sentiment becoming increasingly pessimistic as to the outlook for the US economy, it seems as if it will take a notable shift in sentiment if we're to see any real recovery for the USD so expect today's GDP and claims readings to be under some scrutiny,' said Gary Thomson, head of sales trading at CMC Markets.
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