* Euro rises as German industry orders jump
* Investors wary of pushing euro lower before ECB meets
* U.S. Fed's Williams urges caution on trimming stimulus
By Gertrude Chavez-Dreyfuss
NEW YORK, Nov 6 The euro rose broadly on
Wednesday after stronger-than-expected German industry orders
affirmed expectations the European Central Bank won't cut
interest rates this week despite a steep fall in inflation.
The euro has dropped sharply from levels above $1.38 touched
before last week's inflation data, which fell to its lowest in
nearly four years. The euro zone's inflation numbers have fanned
speculation the ECB may further ease monetary policy possibly at
Thursday's meeting, but Wednesday's robust German industry
orders have put those views on hold.
Some see a risk that the central bank could lower interest
rates or at least lay the ground for such a move, though only
one of 23 money market traders polled by Reuters expects a cut
"Our base case is that the ECB will strike a far more dovish
tone on Thursday, laying the foundation for an interest rate cut
and LTRO (long-term refinancing operation) at the December 5th
meeting," said Camilla Sutton, chief currency strategist at
"We expect that diverging central bank policy between the
U.S. and Europe and the limited tools available to the ECB, will
drive a weaker euro."
The euro extended gains after data showed German factory
orders jumped by 3.3 percent during September, well above the
0.5 percent economists had expected.
In early trading, Europe's common currency was up 0.3
percent at $1.3513, well above Monday's low of $1.3442 and
trendline chart support at $1.3454.
"The euro has come off quite a long way on the potential
that there could be a rate cut. We have a day to go and no one
is certain that the ECB will cut rates," said Jane Foley, senior
currency strategist at Rabobank.
"Now we have had stronger German data and the market doesn't
want to oversell the euro because it is not confident that (ECB
President Mario) Draghi will have any cards to play."
Euro zone private sector surveys showed October activity
growth slowed less than previously estimated.
The euro was also helped by comments from Federal Reserve
official John Williams, who said the Fed should wait for
stronger evidence of growth momentum before trimming
bond-buying. Williams' remarks weighed on the
But a report on Tuesday showing U.S. service-sector activity
picked up in October suggested the economy may not have suffered
badly from the partial government shutdown. This kept alive the
prospect of the Fed scaling back stimulus in the coming months.
Carl Hammer, chief currency strategist at SEB, said he
expected euro/dollar movements to be limited to within 1-2 cents
on either side of $1.35.
"An ECB rate cut would be negative for the euro because it
would play into the hands of short-term speculators as the
market is quite long of euros, but it would not really alter the
long-term picture." He said a rate cut would have limited effect
because rates were already near zero.
ScotiaBank's Sutton said the risk of an ECB rate cut is real
whether it comes in November or December, adding that the ECB
will work hard to soften the euro and its impact on inflation.
ScotiaBank sees the euro at $1.31 against the dollar by the end
of the year.
The dollar index, which measures the greenback's value
against a basket of currencies, slipped 0.2 percent to 80.545
, down from a seven-week high of 80.930 set on Monday.
Sterling earlier hit a one-week high against the
dollar and a one-month peak against the euro after
stronger-than-expected industrial output data.