Dollar mixed ahead of ECB, jobs report
The European Central Bank is expected to raise the federal funds rate by 25 basis points Thursday, the same day U.S. employment data will be released.
NEW YORK (CNNMoney.com) -- The dollar was mixed against major currencies Wednesday, as investors await the European Central Bank's decision on interest rates and the latest unemployment numbers from the U.S. Department of Labor.
The euro was buying $1.58789, up from $1.57922 late Tuesday. The dollar bought ¥105.89, down slightly from ¥106.13 yesterday.
The European Central Bank is widely expected to raise the key federal funds rate by 25 basis points, according to Tom Benfer, director of foreign exchange at BMO Capital. The currency market is already "trading today based on a 25-basis-point increase tomorrow," he said.
If the ECB does in fact raise the key federal funds rate, that would strengthen the 15-nation euro and further weaken the dollar. However, there has been some uncertainty about what the ECB might say and do recently, says Benfer.
"The feeling was they would raise rates in July and that would be it for the end of the year," he said. "But now it appears they may raise rates again between July and the end of the year." That means investors will be closely reading the ECB's statement, looking for hawkish - favoring an increase in interest rates - language.
The ECB is singularly focused on controlling inflation with the euro, but finance ministers think about the economy in broader terms, says Benfer. "The finance ministers think the ECB has no need to raise rates," and that the central bank should "pay more attention to the economic growth," he said.
The difference in opinion between the ECB and the finance ministers is causing tension. "The pressure being applied by the finance ministers on the ECB is definitely increasing," said Benfer.
Economic news: A key unemployment report is due from the Department of Labor on Thursday. If the data continue to show erosion in the job market, it will increase pressure on the Federal Reserve bank to cut rates to support the economy, explained Benfer. However, rate cuts lead to inflation and a weaker greenback.
Economists surveyed by Briefing.com expect the unemployment rate to fall to 5.4% from 5.5% last month.
The National Employment Report from Automatic Data Processing (ADP) showed a 76,000 job drop for goods-producing businesses Wednesday morning - marking the 19th monthly decline in a row - and a 3,000 job decline in the services sector. Economists polled by Briefing.com had expected jobs to decline by 20,000 in June.
"After the ADP report today," which showed weaker-than-expected employment numbers, "if anything, the market is now expecting a more negative employment report," said Benfer.
The Commerce Department reported Wednesday that factory orders rose by 0.6% in May, less than half the gains turned in during April and March, reflecting slumping demand for autos, heavy machinery and steel.
The dollar declined on Tuesday as stronger-than-expected economic reports from Japan and Germany strengthened overseas currencies, amid further concerns about write-offs in the financial sector in the United States. 
