FOREX-Euro falls on ECB speculation; data lifts dollar
* Euro hits one-month low vs pound, near 4-week low vs yen
* Focus on ECB meeting on Thursday, risk of rate cut
* Sterling gains on strong UK services data
By Wanfeng Zhou
NEW YORK, Nov 5 (Reuters) - The euro fell against the dollar on Tuesday, hurt by speculation the European Central Bank may signal easier monetary policy or even cut interest rates this week.
Adding to the dollar's strength was data showing a pick-up in U.S. services-sector activity, which could strengthen the case for the Federal Reserve to start scaling back stimulus later this year.
ECB policymakers meet on Thursday. Falling inflation and forecasts that the euro zone economy will expand slightly more slowly next year than previously expected have added to calls for an interest rate cut, possibly as early as this week.
"In the next week or two, we could see continued euro weakness, but that's all going to depend on the ECB," said John Doyle, currency strategist at Tempus Inc in Washington.
The euro fell 0.3 percent to $1.3475, having hit a session low of $1.3448, according to Reuters data, and edging back toward a seven-week trough of $1.3441 set on Monday.
Asmara Jamaleh, currency strategist at Intesa Sanpaolo in Milan, said while she does not expect the ECB to take any action on Thursday, the euro is likely to stay weak due to divergent euro zone and U.S. economic outlooks.
But she noted that the euro's recent fall has been "very large" since the release of inflation data. Further losses would be limited as long as the euro remained above chart support around $1.3425. Over the next few months it could drop below $1.30, she said.
Technicals also point to increasing bearish momentum for the euro and continued unwinding of long positions could accelerate the currency's decline, analysts said. The next downside target is around $1.3294, the 50 percent retracement of the euro's rally from July to October.
The euro fell 0.8 percent versus sterling to 83.96 pence, its lowest since early October, after a survey showed UK services sector activity expanded at its fastest pace in 16 years last month, highlighting the differing outlooks for the UK and euro zone economies.
Against the dollar, sterling rose 0.5 percent to $1.6044 .
"Investors became increasingly enthusiastic about the prospects for UK growth into next year," said Boris Schlossberg, managing director of FX Strategy at BK Asset Management in New York. "The unit may try to make a run at the $1.6100 level as the day progresses."
Against the yen, the euro fell 0.4 percent to 132.76 yen , having hit its lowest since Oct. 10. It extended losses after dropping below 132.64, its 55-day moving average.
The dollar index, which measures the dollar's value against a basket of currencies, rose 0.2 percent to 80.714, below a seven-week high of 80.930 on Monday.
Against the yen, the dollar was little changed at 98.57 yen , erasing losses after the Institute for Supply Management said its services index rose a point to 55.4 last month, against expectations for a slip to 54.0.
"The report overall suggested a fairly solid U.S. economic backbone, bolstering the case for the Fed to taper policy at one of the next few meetings," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington D.C.
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