A measure of economic sentiment and conditions in Germany may also offer insight into how businesses are coping with persistent inflation and slower growth. "Flash PMI data for Europe make up the bulk of the data in the early European session, with a ZEW economic report also scheduled for 10:00 GMT," CityIndex analyst Matt Simpson said in a note.
The U.S. dollar index is on track for a fourth week of gains and is up about 1.7% through February so far, but has steadied around 104, down from a six-week high of 104.67 hit on Friday.
"Friday's inability of euro/dollar to push lower after breaking below $1.0650 rather sums up the FX market for me," Societe Generale strategist Kit Juckes said. "There are two reasons why the dollar's bounce is getting stuck," he added, noting that European and U.S. growth forecasts are converging and the difference in relative rate expectations is narrowing. "I suspect that further significant dollar strength will require the Fed Funds futures market to start pricing in a 50 basis point (bp) rate hike in March," he said. Fed funds futures imply about a 16% chance of that, while in Europe a 50 bp increase in March is all but priced in. Elsewhere, currency markets were broadly steady.
The Australian dollar fell 0.5% to $0.6878, reversing some of the previous day's gains, and showing little reaction to minutes that showed central bankers did not consider pausing hikes at February's meeting. Sterling fell 0.3% against the dollar to $1.20065 and fared modestly better against the euro, holding steady at 88.81 pence after data showed the UK government ran an unexpected budget surplus in January, after bumper income tax receipts. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Tom Westbrook in Singapore; Editing by Barbara Lewis)
