TheNews

The EUR/USD closed the week at 1.1199 after touching a two month high. The dollar extended its gains against the pound from Thursday’s session after weaker-than-expected manufacturing report. It has recovered most of its losses from earlier in the week.

Economic data released Thursday showed Chicago-area manufacturing activity expanding for the first time in three months, weekly jobless claims falling to their lowest level in 15 years, and a larger-than-expected increase in a closely watched measure of wage inflation. That data helped support the argument, advanced by Federal Reserve policy makers, that weak first-quarter growth was primarily due to transient factors, including bad weather and labor disputes at western seaports.



While not spectacular, Friday’s data didn’t provide a strong signal to the contrary.

Strong economic data increases the possibility that Fed policy makers will raise interest rates at their June meeting, a move that would benefit the dollar.

The euro posted its biggest monthly gain in 4 1/2 years in April as speculators pared record bearish bets. Positive economic reports suggest the European Central Bank’s asset-purchase program is working, while U.S. growth remains uneven. Markets in Europe, including Germany and France, were closed for national holidays, leading to thin trading.

The euro is still forecast to fall by year-end. The median estimate of more than 60 economists compiled by Bloomberg News sees the euro at $1.04 on Dec. 31, more than 7 percent lower than yesterday’s closing price.

“We’ve seen an improvement in European fundamentals, which has translated into support for the euro,” said Joe Manimbo, an analyst at Western Union Business Solutions, a unit of Western Union Co. in Washington. “For the most part, it’s just the euro’s ability to steal the dollar’s lost thunder on the low pulse for the U.S. economy in the first quarter.”



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