The U.S. dollar gained versus the euro Monday, extending the euro's previous-week losses, as the head of the European Central Bank signaled that policy makers are weighing a further rate cut and will announce new measures at its May meeting. "We have decided already to embark on nonstandard measures to cope with the situation since mid-September 2008," ECB President Jean-Claude Trichet said in an interview with Nikkei, published on the Japanese business daily's Web site in a report dated Monday. See full story. Trichet also said the central bank's key lending rate could be cut by a 0.25 percentage point at the meeting. That would bring the rate to 1% from 1.25%. The European single currency traded below the $1.30 level for the first time in five weeks, and recently changed hands at $1.2975, a loss of 0.6% on the day. The dollar index , which tracks the greenback against a trade-weighted basket of rival currencies, pushed higher to trade at 86.424 in recent action, after having finished below 86.00 last week. Strategists at Commerzbank said further downside for the euro may prove limited ahead of the release of key economic indicators this week: Tuesday's ZEW index of German investor confidence, Thursday's surveys of euro-zone purchasing managers, and Friday's release of the closely watched Ifo index of German business confidence. The data "should confirm the view that the medium-term outlook for the economy has stabilized," they wrote. That would likely mean that any measures that the ECB might take would remain limited to extending the maturity of refinancing operations and broadening the range of collateral eligible to be used in repo transactions, they said. Accordingly, the Commerzbank strategists played down prospects for a more aggressive strategy of quantitative easing. Meanwhile, the dollar lost ground against the Japanese currency, trading at 98.39 yen, down 0.7% from Friday. The dollar had pushed higher last week despite gains in equity markets. The greenback had previously maintained a largely inverse relationship with equity markets, rising when shares fell as investors moved out of riskier assets. Conversely, the dollar tended to fall when equities gained ground. Strategists at BNP Paribas said the dollar's ability to climb reflects the role of corporate-bond-market flows and predicted it "will remain in demand as corporate-bond markets see further signs of improvement. "Corporate-bond-market flows had been the dominant contributor to funding the U.S. current-account deficit ahead of the financial crisis in 2007, with most U.S. inflows generated from Europe," they wrote. "The corporate-bond market has rallied and [the euro] turned south (versus the dollar) three weeks ago, exactly at the time when corporate bonds played catch-up with the better equity market outlook." Also on the move, the British pound fell 1.7% to stand at $1.4564. The euro rose 1.1% against sterling to a price of 89.14 pence. The pound rallied during the early part of April but proved unable last week to extend gains above important resistance around the $1.50 level. Economists at Lloyds TSB said sterling may be seeing some pressure due to expectations that the release of the British government's budget for the current financial year will significantly boost public borrowing. Markets will also be paying close attention to the latest moves in equities, with U.S. stocks turning negative ahead of what will be a particularly busy week of earnings. The S&P 500 is up about 30% from its March 6 low. Bank of America said it earned $4.2 billion of profit during the first quarter, topping analyst estimates.

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