Dollar drops against the euro

The US dollar has fallen against the euro ending close to a six-week low. Investors are expecting economic growth for the second quarter of the year to be soft.

If this is the case it is likely that the Federal Reserve will choose to keep interest rates low. Although the first quarter saw a GDP rise of 1.8 per cent, analysts are expecting a figure closer to 1 per cent for the second.

In May Ben Bernanke, head of the Fed, indicated that the central bank could begin to ease back on its programme of bond buying, as long as economic data supported the move. This created confidence in the dollar. However, it now looks more likely that quantitative easing will remain in place for the time being.

The euro was last trading at $1.3289, a rise of 0.2 per cent against the greenback. The single currency has been given a boost because of a eurozone survey that indicates confidence is growing. However, the euro could come under pressure again if the European Central Bank announces that it too will be continuing with a loose fiscal policy.

The Bank of England is also likely to follow suit after a meeting tomorrow. Hints that the Reserve Bank of Australia could cut interest rates further have caused the Australian dollar to fall to $0.9050, its lowest level in two weeks.