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Dollar retreats before services report, eyes to focus on NFP

Publish Date05/03/2013 01:25:32 PM

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The U.S. dollar dropped for a second day against a basket of major currencies ahead of the release of ISM non-manufacturing report which is predicted to show a slowdown in February.   

The green currency halted its rally after visiting six-month high of 82.50 on Friday ahead of today`s report which will show an ease in expansion in services to 55.0 from 55.2 in January.

Yet, the main highlight of the week will be on Friday with the release of the awaited non-farm payrolls report which will give an update about the health of the labor sector amid talks from the Fed about continuing with stimulus, especially with the start of sequester which was kicked off on March 1.

The dollar index, which tracks the dollar movements versus a basket of major currencies, is currently hovering around 82.06, compared with the day`s opening of 82.18.   

On the other hand, the European common currency inched up after the release of data showing services sector came better than initial estimates of 47.3, yet it deteriorated to 47.9 from 48.6 in January, raising worries before data due this week to confirm the euro area economy contracted 0.6% in the last three months of 2012.

The euro pared most of its earlier gains against the dollar as it is meanwhile trading around 1.3035, falling from a session`s high of 1.3074, where the trading range for today is among the key support at 1.2905 and key resistance at 1.3155.

Still, there are worries as Italian elections reached a deadlock situation as no party managed to get an absolute majority, thereby there may elections as early as June if Grillo refused the last offer by Bersani to form a coalition government.   

By the same token, euro area finance minister did not settle the issue of bailing out the small European island, Cyprus, postponing the decision till late March. 

Later in the week, eyes will focus on the ECB`s rate decision amid minor expectations of seeing an interest rate cut after the 0.6% drop in the euro area`s growth in the fourth quarter of 2012.

Finally, the British pound resumed its rebound for a second day versus the greenback to trade around 1.5160 from the day`s low of 1.5105 after a report released today showing a widening expansion in U.K. services to 51.8 last month from a prior of 51.5.

The trading range for today is among key support at 1.4965 and key resistance at 1.5310.

On Thursday, investors will put an eye lid on this week`s monetary decision by the BOE amid expectations of seeing a hold in the bank`s monetary stance for another month.

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