MW: Dollar sees small rebound as focus turns to jobs data
British pound consolidates as services sector slows expansion
By William L. Watts, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar gained ground versus most major rivals other than the Japanese yen Wednesday, boosted by a round of apparent short-covering in the wake of weaker European data.
But analysts warned the rebound appeared tepid, coming on thin volume.
The dollar remains overshadowed by ongoing concerns the U.S. Federal Reserve is edging toward a further easing of monetary policy due to concerns about the strength of the economic recovery, said strategists at Brown Brothers Harriman.
"There is continued concern about the state of the U.S. economic recovery, [quantitative-easing] talks have come back in fashion and this hesitant market environment will most likely prevail getting into the release of the July non-farm payrolls," they said in a research note.
The dollar index (DXY 80.58, -0.02, -0.02%) , a measure of the greenback against a basket of major currencies, rose to 80.625 from 80.589 late Tuesday.
The euro (EURUSD 1.3218, -0.0014, -0.1058%) slipped to $1.3221, trimming an earlier loss but down slightly $1.3234 late Tuesday. The British pound (GBPUSD 1.5952, +0.0006, +0.0376%) changed hands at $1.5937, down slightly from $1.5947.
Traders will be watching the ADP employment survey for July, set for release at 8:15 a.m. Eastern, for clues to Friday's non-farm payrolls report. Strategists said the key figure for U.S. traders, however, is likely to be the July ISM non-manufacturing index, due at 10 a.m. Eastern.
Meanwhile, a slightly weaker-than-expected final July services purchasing managers index reading for the euro zone helped undercut support for the single currency, said Boris Schlossberg, director of currency research at GFT.
The euro's recent rebound had gained strength after a run of stronger-than-expected data for the single-currency region outshone lackluster U.S. economic data. The services PMI for the region rose slightly to 55.8, but fell short of a preliminary reading of 56.0. Read about euro-zone PMI.
The pound saw selling pressure after the U.K. July services PMI posted an unexpected decline to 53.1 from 54.4 in June. Economists had expected the index to edge up a notch to 54.5.
The data showed the pace of growth in Britain's dominant services sector continued to slow from its February peak, highlighting concerns about the durability of the recovery headed into the second half of the year. Read about U.K. services PMI.
"Prior to the release, currency traders were gearing up for a test of the $1.6000 figure, and the unit may yet make a run towards that level if U.S. data proves weaker than expected fueling even more speculation about possible fresh rounds of QE from the Fed," Schlossberg said.
"However, with the pound now rising solely on anti-dollar flows alone rather than any improving fundamentals, we believe that any further progress beyond $1.6000 will be limited as traders become increasingly concerned about U.K. growth prospects in the second half of the year," he said.
The dollar lost ground versus the Japanese currency (USDYEN 85.4600, -0.3800, -0.4427%) to trade at ¥85.41, down from ¥85.84 in late North American trading Tuesday. It earlier dropped as low as ¥85.29, according to FactSet data.
A drop below November's low of ¥84.82 would put the dollar at its lowest level since 1995.
