The US dollar held firm yesterday and within a penny of six-month highs against the euro. The dollar continues to draw solid support from expectations that next month could bring higher borrowing rates in the US and lower, euro-weakening ones in Europe. The case for lower lending rates in Europe gained traction in news of a surprise slowdown in growth across the 19-nation economy. Eurozone growth slowed to a 0.3 per cent quarterly rate in the third quarter, down from an already anaemic 0.4 per cent during the spring. Though firmer yesterday, the dollar was on course for a modest decline on the week, having succumbed to a bout of profit-taking following its jobs-fuelled rally from last week. Canada’s dollar was less than two cents away from 11-year lows.

Euro

The euro treaded water above six-month lows against the dollar but a lid remained on its upside after subdued area growth over the summer served as a green light for the European Central Bank to double down on stimulus next month. Both the eurozone and Germany grew at a paltry rate of 0.3 per cent during the summer quarter, down a tick from 0.4 per cent in the spring. The euro has found a tentative floor with Fed officials keeping a wary eye on the dollar whose strength has proven bad for US growth.

Sterling

Ahead of key news on America’s main growth engine, the consumer, sterling was set for a solid, near two-cent gain on the week against the dollar, helped by the UK currency’s outperformance against the euro. That has helped the pound recover from six-month lows hit a week ago against the dollar. Despite its resilient week, Britain’s steady interest rate outlook for as far as the eye can see should limit gains for the pound and leave it vulnerable should news next week on UK inflation and consumer spending meet markets’ subdued expectations.

US dollar

The dollar was choppy in the wake of lacklustre news on the economy’s main driver: The consumer. Despite last month’s jobs explosion, consumers barely spent with retail sales up 0.1 per cent. So-called core spending rose 0.2 per cent, half of forecasts of 0.4 per cent but an improvement from the 0.1 per cent increase in September. Core producer or wholesale inflation slowed to an annual rate of 0.1 per cent in October from 0.8 per cent. Though underwhelming, the news will not scupper a Fed rate hike next month, limiting downside risk for the dollar.