Forex - Dollar falls as euro rallies on data, ECB expectations

The dollar softened against most major currencies on Wednesday amid expectations that that European Central Bank will hold off on trimming interest rates at a policy meeting that concludes Thursday, especially after better-than-expected manufacturing data out of Germany published earlier

In U.S. trading on Wednesday, EUR/USD was up 0.35% at 1.3523.

The euro firmed on reports that ECB sources said the monetary authority was unlikely to cut rates at its monthly meeting on Thursday despite soft pricing and employment data hitting the wire in recent weeks.

Earlier Wednesday, data revealed that factory orders in Germany, Europe's largest economy, rose 3.3% in September, far surpassing expectations for a gain of 0.5% and were also up 7.9% on year, which sparked demand for the euro that came at the dollar's expense.

Elsewhere, revised data revealed that the final reading of the euro zone’s services purchasing managers’ index ticked down to 51.6 in October from 52.2 in September but was still higher than a preliminary estimate of 50.9.

Capping the euro's advance and supporting the greenback somewhat, however, was a separate report showing that euro zone retail sales fell 0.6% in September from August, more than market calls for a 0.4% contraction.

On a yearly basis, euro zone retail sales rose 0.3%, missing consensus forecasts for a 0.7% expansion.

The greenback was down against the pound, with GBP/USD up 0.25% at 1.6082.

The Office for National Statistics said earlier that U.K. manufacturing production rose 1.2% in September, beating expectations for a 1.1% increase and also up 0.8% on a year-over-year basis, beating forecasts for a 0.7% annual gain.

The ONS said industrial production rose 0.9% in September, compared to expectations for a 0.5% increase and was 2.2% higher than in the same month last year.

A day earlier on Tuesday, data revealed that the U.K. construction purchasing managers’ index rose to 59.4 last month, the highest level since September 2007, from 58.9 in September. 

Analysts were expecting an unchanged reading.

Also on Tuesday, data showed that activity in the U.K. services sector expanded at its fastest rate in 16 years in October.

Markit said the U.K. services purchasing managers index rose to 62.8 in October up from 60.3 in September, the sharpest rise in activity since May 1997. Economists had been expecting the index to tick down to 59.8.

The dollar was down up against the yen, with USD/JPY up 0.17% at 98.67, and down against the Swiss franc, with USD/CHF down 0.20% at 0.9118.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.36% at 1.0416, AUD/USD up 0.22% at 0.9528 and NZD/USD trading up 0.26% at 0.8386.

Investors shrugged off data showing that the number of new building permits issued in Canada rose 1.7% in September, below expectations for a gain of 6.0%.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.30% at 80.55.

On Thursday, the U.S. is to publish a preliminary estimate of third-quarter gross domestic product. Meanwhile, the Labor Department is to release its weekly report on initial jobless claims.