Euro set to drop as the rally may be in its last stages UBS says

The euro’s rally against the dollar may be entering its “last stage,” and investors would likely benefit from selling the 16-nation currency against the greenback, UBS AG said. The euro is set to weaken toward $1.30, analysts led by Mansoor Mohi-uddin, Zurich-based chief currency strategist at the world’s second-biggest foreign-exchange trader, wrote in a note to clients yesterday. The analysts reiterated forecasts for the euro to trade at $1.40 in one month’s time and weaken to $1.30 in three months. “We remain positive on the U.S. dollar and think that the greenback is likely in its final stage of weakness,” the analysts wrote. “Equity and bond flows have the potential to surprise and could lend support to the dollar.” The EUR/USD is currently trading at $1.4120 as of 8:50am, London Time.

Sterling gained against a broadly falling dollar on Monday, as share prices rose on expectations for the global economy to stabilise, prompting investors to cautiously shift toward perceived riskier assets. London's FTSE index was up some 1.3 percent by afternoon trade, and U.S. share prices were also up in early trade in the wake of General Motors Corp filing for bankruptcy, as widely expected. Data on Monday showed Britain's manufacturing sector contracted at its slowest pace in a year in May as the pace of decline in new orders, output and employment eased. "Today's PMI reading adds to the growing body of evidence that the pace of contraction in the UK is slowing, even raising the possibility that the UK may be one of the first large economies to emerge from the crisis," said analysts at UBS. The GBP/USD is currently trading at $1.6395 as of 9:08am, London Time.

The number of Americans signing contracts to purchase previously owned homes probably rose in April for the fourth time in five months as lower prices attracted buyers, economists said before a report today. The projected 0.5 percent increase would follow a 3.2 percent gain in March, according to the median estimate of 32 economists surveyed by Bloomberg News. Foreclosure-driven declines in values may put more houses within reach of first-time buyers, helping to stabilize the market and stemming the biggest drag on economic growth. Still, with mortgage rates no longer dropping and unemployment climbing, the real-estate industry may flounder near recent lows for months before a sustained recovery takes hold.

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