In the currency market, the dollar rose against the euro. Late Monday, the euro was trading at $1.5525 vs. $1.5622 on Friday. Traders were oblivious to weak domestic data that, as has been the case during recent straw-clutching days, wasn’t as bad as it might have been.

As the Hightower Report commented, “With the Dollar apparently springing to life in the wake of a slightly better than expected but negative Chicago Fed National Activity Index reading, it was clear that the macro economic bar among the world’s leading economies was set very low. In other words, the Dollar only had to avoid a patently discouraging scheduled reading to gain the upper hand on Monday morning.”

Instead, investors’ attention was focused across the pond, where the closely-watched Ifo Institute’s German business-sentiment index fell to 101.3 in June, its lowest level in more than two years.

Additionally, the RBS/Markit composite PMI reading—a purchasing-managers’ index for the manufacturing and service sectors across the 15-nation eurozone—delineated a contraction in activity in June, dropping to 49.5 from a reading of 50.6 in May.

The data highlight the European Central Bank’s dilemma, as it faces surging inflation at the same time that economic activity is less than robust. Doubts have surfaced that the ECB will be able to raise interest rates next month.

Although over the past two weeks nearly everyone at the ECB from President Trichet on down has echoed the common refrain that inflation remains too high necessitating further tightening, economic reality may temper any immediate plans to raise rates, wrote Boris Schlossberg, of Forex Capital Markets.

Source: Buck Gains on Weak Eurozone Data – ECB Rate Hike no Longer Seen as Certain