The euro was trading just off a fresh all time high against the dollar as odds of a rate cut in the 15-nation single currency zone looked increasingly bleak, while rumours circulated the markets that an emergency US rate cut could come this afternoon.

The euro rose above 1.54 usd for the first time earlier this morning, on market talk that the US Federal Reserve may cut its key Fed Funds rate after the release of this afternoon's crucial non-farm payrolls data. The currency hit a record high of 1.5429 usd before falling back on profit taking.

The euro has surged against the dollar in recent days as their respective interest rate outlooks continue to diverge.

The European Central Bank kept interest rates on hold at 4.0 pct yesterday in line with expectations. But any hopes that a rate cut could be on the cards sometime soon were largely dashed by comments by ECB president Jean-Claude Trichet in the subsequent press conference
Trichet reiterated that the medium-term inflation outlook is still subject to upside risks and that the ECB will do whatever is necessary to ensure price stability, giving no hint that there could be a rate hike in the coming months. He also refused to address questions on whether the euro's recent climb higher reflected economic fundamentals.

'ECB President Trichet had the opportunity to take the steam out of the euro's rampant gains at yesterday's post council meeting press conference, instead he appeared determined to do just the opposite,' said Gavin Friend, currency strategist at Commerzbank.

Meanwhile the dollar was weighed on yesterday by further bleak news about the US housing market. The Mortgage Bankers Association reported that the number of mortgages subject to foreclosure jumped to a record 0.83 pct in the fourth quarter of last year, up from 0.54 pct the year before.

Later today comes the key piece of US data of the week - the February non-farm payroll figures.

The initial consensus was that the number of jobs created during the month would be up by 25,000 after falling by 17,000 in January. However the ADP survey of private sector payrolls released earlier this week posted a 23,000 fall during the month and analysts now expect today's data could show a second consecutive fall.

'There are clear indications there could be another drop in payrolls such as the rising trend in jobless claims, deterioration in the household survey of job market conditions, softening in the employment components in both the ISM manufacturing and non-manufacturing surveys and last but not least the drop in the ADP survey,' said Mitul Kotecha, currency strategist at Calyon.

'The recent run of bad data has taken its toll on the dollar and until expectations adjust sufficiently to the point where it is clear that the bad news is discounted the currency is likely to continue to weaken,' he added.

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