NEW YORK (TheStreet) -- The U.S. dollar was set to finish the week on a firmer tone against European currencies encouraged by a bout of month-end profit-taking.
The recent hawkish comments from European Central Bank officials have prompted euro buying on dips this week as investors assess the outlook for central bank policy and seek long positions in the banks most likely to act first. But failure to break the $1.3850 level leaves the euro susceptible to near-term weakness ahead of the Irish elections Friday.
At the same time, U.S. data Friday also is likely to remain supportive for the dollar as data from recent reports indicate a strong chance for an upside surprise to fourth-quarter gross domestic product, while consumer confidence is expected to remain buoyant.
Meanwhile, sterling hit session lows after U.K. GDP was revised a notch lower, which was below market expectations. Elsewhere, the dollar bloc is the strongest performer against the dollar as risk appetite gradually returns.
Global bond markets were solidly weaker, snapping this week's bond rally, as risk aversion is receding and rate expectations start to dominate again. In Europe, bunds were sharply lower as market attention shifts back to the ECB after inflation in five German states accelerated in February, prompting a 3 basis points rise in the 10-year bund. Short-dated gilts, meanwhile, are outperforming with the two-year yield down 3 basis points following the weaker-than-expected GDP print.
