Reply #24: U.S. inflation, growth worries keep dollar under pressure

[UpInArms]

http://www.reuters.com/article/hotStocksNews/idUSN16387...

LONDON (Reuters) - The dollar slipped to a 2-1/2 week low against a basket of major currencies on Monday, as the worst U.S. consumer confidence reading in nearly three decades raised concerns about stagflation.

The May Reuters/University of Michigan index of U.S. consumer confidence dropped to 59.5 on Friday, the lowest level since June 1980, while short-term inflation expectations surged to their highest in a quarter of a century.

In contrast, analysts said that there was scope for relatively robust readings from key German sentiment surveys this week to support the euro by reinforcing the case for the European Central Bank to leave rates on hold a while longer rather than cutting them.

"For now it looks as though markets are going to continue to press the (euro's) top up towards $1.5650... but I don't think we are really going to have the momentum to break out of the current ranges," said Jeremy Stretch, strategist at Rabobank.

"Investors might be buying into the idea that the German data -- ZEW and Ifo later this week -- might be a little bit on the firmer side of expectations," Stretch said.

"And at the same time there's increasing nervousness about the inflation picture in the U.S. ... if growth remains weak and inflation is elevated then that's not a particularly comfortable place to be," he added.

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