The dollar was unable to reclaim the 1.19 level against the Euro during Monday and drifted back to 1.1960 again in New York. The pattern… … continued in early Europe on Tuesday with the Euro pushing slightly stronger to 1.1980 before dipping after the German ZEW report.

There will be greater caution over
dollar buying ahead of important US data releases this week which could have an
important market impact. The growth data is liable to be weaker than that
released in February, especially with less favourable weather, and retail sales
data will provide the first major test on Tuesday. The dollar will remain very
vulnerable to any shift in interest rate expectations and the currency dipped
slightly after Fed Governor Yellen stated that the Fed would need to be
sensitive to the risks of increasing interest rates too
far.

The United Arab Emirates central
bank reported that it would increase the proportion of Euro reserves to 10% and,
although the amounts involved are relatively small, the dollar will be more
sensitive to poor current account data in an environment where there are market
concerns over underlying reserve diversification and fears over US protectionist
sentiment.

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