BLBG:Euro Falls Before Industries Data, Spanish Debt Sales
The euro weakened against the yen and the dollar before a report that economists said will show European retail sales stagnated in May, adding to signs the region’s economy is slowing.
The 17-nation currency dropped versus 12 of its 16 major counterparts on speculation the European Central Bank will cut interest rates to a record tomorrow. Sweden’s krona rose to a 16-month high against the euro after the central bank kept interest rates unchanged after some economists forecast a cut. U.S. markets are shut today for the Fourth of July holiday.
“The risk is to the downside on the euro,” said Thomas Harr, head of Asian foreign-exchange strategy at Standard Chartered Plc in Singapore. “The European situation remains extremely challenging and it’s a very deep recession that we’re facing in Europe.”
The euro declined 0.2 percent to 100.42 yen as of 9:45 a.m. London time after dropping to 98.33 on June 28, the weakest level since June 6. The shared currency fell 0.1 percent to $1.2590. The yen was little changed at 79.80 per dollar.
Euro-area retail sales were unchanged in May from a month earlier, when they dropped a revised 1.4 percent, the European Union’s statistics office in Luxembourg will say today, according to economists surveyed by Bloomberg News.
London-based Markit Economics said today a final reading on its German services index was 49.9 in June, versus an initial estimate of 50.3. A reading below 50 indicates contraction. Markit’s euro-area composite index of services and manufacturing industries was 46.4 last month. That’s the fifth month the measure has been below 50.
‘Downward Trend’
The ECB will lower its main refinancing rate by a quarter- percentage point to 0.75 percent tomorrow, the median estimate of 62 economists in a Bloomberg survey showed.
“The euro is in a downward trend,” said Kikuko Takeda, a senior currency economist at the Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “Given the euro region’s economy is bad, I think the chances are high that the ECB will cut interest rates this week.”
Sweden’s currency gained for the sixth time in the past seven days versus the euro after the Stockholm-based central bank left the repo rate at 1.5 percent after cutting it twice since December. The decision was predicted by 15 of the 20 economists surveyed by Bloomberg. The rest forecast a reduction to 1.25 percent.
The krona advanced 0.3 percent to 8.7155 per euro after rising to 8.7089, the strongest level since March 2011.
Implied volatility of three-month options for Group of Seven currencies fell as low as 9.35 percent today, the least since May 4, the JPMorgan G7 Volatility Index showed.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
