Euro Eases Off High Against Dollar

(RTTNews) - The euro eased slightly against the dollar after setting a new record high in overnight trading. The early advance followed the release of higher-than-expected consumer inflation reports out of Europe. The euro jumped against the pound on the inflation news, but has since given back some of those gains.

The euro has rallied lately on perception that the European Central Bank is the most hawkish of the world's major central banks. The U.S. Federal Reserve is largely expected to cut its benchmark interest rate next week, and recent data out of Japan has indicated signs of weakness.

Meanwhile, housing data out of the UK and recent comments by Bank of England Governor Mervyn King left the impression that the UK central bank would not be raising rates in the near future.

Even though the ECB left rates unchanged last week, comments from the bank's president indicated that the region's monetary policy will remain geared toward fighting inflation. Thursday's inflation data did little to change this picture.

However, given the recent run-up in the euro, which took it to a much-publicized new high versus the dollar, traders were wary to push the European currency much higher on Thursday.

French consumer prices rose more than expected in August, official data showed Thursday. A report from the statistical office INSEE announced that annual inflation accelerated to 1.2% in August from the 1.1% recorded in July. Economists expected consumer prices growth to remain at 1.1%.

In overnight trading, the euro briefly saw a new record high against the dollar trading at 1.3926 as of 4am ET. Since then the euro fell to 1.3862 before recovering to trade at 1.3895.

There was not much economic news out of the U.S. However, the Department of Labor released its report on initial jobless claims in the week ended September 8, showing that jobless claims rose less than economists had been expecting compared to the previous week.

This news softened the blow somewhat of last Friday's U.S. Department of Labor report indicating a modest decrease in jobs in the month of August, and may have temporarily helped slow the euro.

Traders are looking forward to next Tuesday's highly anticipated rate decision from the Federal Reserve. The Fed is widely expected to lower its benchmark interest rate by at least 25 basis points. This speculation helped fuel the dollar's slide to record lows against the euro recently.

The euro spiked to 0.6874 at 5:30 against the pound, its highest level since May of this year. however, into late morning trading the euro has given up all its gains and then some, slipping to 0.6844, almost the same as it was 24 hours ago.

The Royal Institute of Chartered Surveyors said that the U.K. house prices fell 1.8 percentage point in August compared to 10.8 percentage point gain in July. The findings may indicate the housing market is slowing in the UK as well, as lenders pass the costs on to first-time buyers.