Dollar-Euro flat ahead of eurozone second quarter date

The dollar was flat against the euro Wednesday ahead of expected poor growth numbers form the eurozone, while the yen slipped on news the Japanese economy contracted 1.7 percent last quarter. The dollar spiked lower early in US trader after the Commerce Department's report that retail sales stagnated in July, when economists had expected a pickup.

But the greenback quickly recovered to end the day virtually unchanged, with support for the euro dampened by more signs of disinflation in the eurozone. Analysts said the market was now pegged to second quarter economic growth estimates for, most importantly, Germany, as well as other EU countries, due out Thursday.

Worries are that Germany could also report its economy shrank in the April-June period. High frequency Economics forecast a 0.5 percent contraction for Germany, and 1.1 percent for France. An economic contraction in Europe's growth engine may highlight an increased threat for deflation, said David Song at Daily FX.

If that is the case, Song said that European Central Bank president Mario Draghi "may show a greater willingness" to take extraordinary measures to shore up eurozone growth. Meanwhile the pound slipped as speculation rose that an expected rate rise by the Bank of England will be taken off the table after signs of weakness in the British job market.

A significant cut to the Bank of England's wage growth forecast saw sterling crash to a more than two-month low against the US dollar, as traders took the revision to mean that the central bank won't hike rates this year, said Craig Erlam, market analyst at Alpari traders.

Source: yahoo.com