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LONDON (Thomson Financial) - The dollar remains steady against the euro ahead of some key US economic data this afternoon and on the eve of an interest rate decision from the European Central Bank.
Earlier, the US currency recovered some ground as traders squared up positions ahead of a raft of US economic data. The euro's move as high as 1.5250 usd during yesterday's session proved short-lived as investors awaited further clues on the health of the US economy and what the Federal Reserve will do at its next rate-setting meeting on March 18.
The most important news today is likely to be the Institute for Supply Management services index for February. Though this is expected to have risen to 47.5 from 44.6, it still remains in contraction territory.
The monthly ADP employment report, a closely-watched gauge of the US labour market, will also be at the forefront of the market's attention.
'If these data show that the credit crunch is starting to affect corporate activity and the labour market more severely than had been expected, the dollar may resume its nosedive,' said Mitsubishi (other-otc: MSBHY.PK - news - people ) UFJ Securities forex manager Minoru Shioiri.
Both the upcoming data and the corporate news may well determine whether the Fed cuts its benchmark funds rate by 75 basis points to 2.25 pct or by 50 basis points to 2.50 pct.
Elsewhere, attention will focus on Thursday's interest rate decision from the European Central Bank.
Though the ECB is unlikely to follow the lead across the Atlantic, there are growing expectations that the central bank's president Jean-Claude Trichet will sound a more dovish tone in his ensuing press conference.
Anything he says about possible intervention to stem the export-sapping rise in the euro will be particularly important to the near-term levels of the single currency.
Both EU Commission and Eurogroup lawmakers have fired warnings about the euro's level in recent days.
'Given the ECB's mandate to ensure price stability and the Fed's willingness to see further improvement in export growth, the risk of unilateral or coordinated intervention to precipitate a euro adjustment against the dollar is low at this stage,' said Ashley Davies, currency strategist at UBS (nyse: UBS - news - people ).
Elsewhere, the pound recovered its poise after a key survey into the services sector saw output growth accelerate and price pressures elevated.
Analysts said the prospect of another imminent rate cut from the Bank of England is likely to diminish further by the news that output in the UK services sector unexpectedly rose during February.
The survey from the Chartered Institute of Purchasing and Supply also showed that price pressures in the sector, which accounts for over two-thirds of UK GDP, are at their highest since records began more than a decade ago.
'The combination of faster growth and stronger price pressures shown in February's CIPS report on services undoubtedly supports the case for the MPC to be cautious about how quickly it cuts interest rates,' said Vicky Redwood, economist at Capital Economics.
Despite the sharp rise in the CIPS index, the euro is still trading near its new all-time high of 0.7689 stg.
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