By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar slipped versus most major rivals on Monday, with the euro getting a lift as investors awaited the outcome of a meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy aimed at ironing out differences ahead of a key European summit on Friday.
The euro EURUSD +0.0743% traded at $1.3455 versus the dollar, up from $1.3518 in North American trade late Friday.
“True, it seems that the market has been here before, only to be disappointed at every single turn, but the vibes from Berlin and Frankfurt suggest that the political establishment and the European Central Bank have now reached an understanding on what needs to be done,” said Geoffrey Yu, strategist at UBS.
Merkel and Sarkozy will meet in Paris Monday afternoon.
“Expectations are already high,” wrote strategists at Commerzbank. “There will be more pre-summit meetings in coming days and the ECB meeting on Thursday will also be a crucial part in the crisis response jigsaw, with speculation mounting about the ECB’s role in connection” with the International Monetary Fund or the European Financial Stability Facility, the euro zone’s bailout fund.
ECB President Mario Draghi will be closely watched when he holds his monthly news conference Thursday. Draghi helped trigger a rebound by the euro and a rally in peripheral European bond markets last week after he appeared to hint the ECB could step up bond purchases if euro-zone leaders agree to a new “fiscal compact.”
Meanwhile, Italian Prime Minister Mario Draghi on Sunday unveiled a program of 30 billion euros ($40.2 billion) of further budget cuts and growth measures.
The British pound GBPUSD +0.07% changed hands at $1.5644 versus the U.S. unit, up from $1.5596. The purchasing managers index for the U.K.’s dominant services sector unexpectedly rose in November. Read Market Pulse on U.K. November PMI.
PMI readings for Britain’s services, manufacturing and construction sectors “all surprised a little on the upside, and a mechanical [gross domestic product] forecast for [the fourth quarter] based on the current PMI readings suggests [quarterly] growth of around 0.3% to 0.4%,” said Jens Larsen, chief European economist at RBC Capital Markets. “But the PMIs have overestimated growth recently, and with no hard data to go by and the deteriorating outlook, we stick to our current forecast of 0.1%.”
The dollar index DXY -0.21% , which measures the U.S. unit against a basket of six major rivals, traded at 78.400, down from 78.609.
The dollar slipped versus the Japanese currency to trade at 77.98 yen, down slightly from ÂĄ78.03.
William L. Watts is a reporter for MarketWatch in Frankfurt.
