The US dollar steadied on Monday, after losing ground on gains made on Friday due to strong US job data. Oil price rises prompted investors to sell over the weekend in favour of higher-yield currencies, but levelled out on Monday as traders wait for Central Bank data this week.

Analysts expect that the euro and dollar will even out until the Federal Reserve’s interest rate verdict on Tuesday and the European Central Bank’s decision of Thursday. It is widely expected that both banks will keep interest rates unmoved.

The US dollar fell against the euro today, as the euro gained ground from its month low earlier this week. It is thought that investors still have concerns over the US economy and have shifted to the euro as they await European economic data released later today.

Many analysts are expecting that the European sentiment index will show a down turn in the economic growth and give the European Central Bank (ECB) little scope to lower interest rates despite high inflation rates.

The euro continued to climb higher against the dollar today, ahead of the European Central Bank’s decision about interest rates tomorrow. It is widely expected that the ECB will raise interest rates, the first time since June 2007.

The dollar had seen a brief boost on Tuesday after better than expected ISM manufacturing data was released, but this was short lived as traders remain unconvinced that the US economy has turned a corner.

The Forex market is bracing itself for what could be an unpredictable week, as an influx of key economic releases and US Independence Day holiday is expected to add to the volatility of the market. US dollar traders will be eagerly awaiting the release of ISM Manufacturing and NON-Farm payroll data, while euro investors will see the Euro-zone inflation and German labour data. It is also expected that the European Central Bank will raise rates for the first time since last June.

The U.S. dollar traded a little higher against the major currencies in Monday trading in Tokyo, held up by positive demand from investors seeking higher yielding assets.

Overall trading was cautious with investors waiting for a flurry of U.S. economic data due out later this week, as well as announcements from the Federal Reserve and European Central Bank. The financial market will be looking for any inklings on where interest rates are headed when the Federal Reserve and the European Bank make their speeches on Tuesday.

The US Federal Reserve seemed to have opened a can of worms as European Stocks are now falling, their efforts to avoid a recession may well as said before be counter-productive.

The United Kingdom FTSE 100 has seen an index fall of 4.5% after worries that the cental banks may not follow suit with the US reduction in interest rates.