The dollar drifted lower against the euro and sterling on diverging interest rate outlook among three central banks. The euro extended its gains against the dollar from Friday’s weaker-than-expected US payrolls report. The single currency hovers above the 1.36 handle against the dollar on Monday. Today’s currency market is quiet as trading volume is light during UK public holiday.
The Fed meets on Wednesday and is seen keeping rates steady at 5.25%. The Bank of England is expected to lift interest rates from 5.25% to 5.5% on Thursday, which will be the first time for the British rates move above those in United States since January 2006. Meanwhile, the European Central Bank is likely to leave the benchmark rates unchanged at 3.75% on Thursday. However, the market focus will be on the post-conference talk by the ECB chairman Trichet and look for any signal of a June rate increase.
The Canadian dollar is the biggest mover today. The market is attracted to test the 1.1000 key resistance. Canada building permits rose 27.4% in March, compared to a 22.4% decline.
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