US Dollar Weak as Bad Data Means Higher Probability of QE3

The US dollar was weak today as reports about manufacturing and consumer sentiment were unexpectedly bad, spurring speculations that the Federal Reserve may yet turn to quantitative easing as a way to bolster the faltering economic recovery. The greenback was almost flat against the euro.
The Federal Reserve Bank of Richmond reported that its manufacturing index slipped from 4 in May to -3 in June. Most analysts believed that the index would stay flat. The Conference Board consumer confidence index dropped to 62.0 in May from 64.4 in April, while investors hoped that the decline would be smaller.
The poor fundamental data adds to evidences that economic recovery in the United States is not strong and needs to be supported. A third round of QE was expected this month, but the Fed disappointed market participants by refraining from it. QE3 is still possible and any negative data would increase its probability.
EUR/USD was at about 1.2487 as of 23:54 GMT today after it fell from 1.2504 to 1.2441. GBP/USD was up from 1.5573 to 1.5634 and USD/JPY declined from 79.66 to 79.47.

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