Friday December 3, 2004 - 11:06:31 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
Payroll reaction vital
With neutral data, the more likely outcome for now is a for a period of consolidation and a gradual dollar correction stronger, especially as the central banks are likely to use careful Euro selling orders to support the US currency. A payroll report of over 250,000 could push the dollar to 1.32, but the US currency will still find it difficult to sustain strong gains given underlying selling pressure.
The dollar hit a low close to 1.3380 in early Europe on Thursday, but the US currency recovered during the day and it strengthened to a high of 1.3240 before settling around 1.3265 in early Europe on Friday. The dollar should gain some support for a decline in oil prices.
As expected, the ECB left interest rates unchanged at 2.0%. Trichet refused to comment on intervention and he also cautioned ECB officials against making remarks. He did, however, state that intervention is a weapon at the bank's disposal. The potential for careful use of covert Euro selling by the bank will probably be more effective in curbing dollar weakness. The Euro-zone PMI index for the services sector recorded a decline to 52.6 in November from 53.5, although this was marginally better than expected.
The US economic data today will be very important for the dollar. An employment increase above 250,000 would reinforce optimism over the US economy and strengthen the case for further Fed rate increases. Although markets are tending to ignore positive data, a strong payroll figure and a rise in US yields towards 4.5% would increase the potential for a covering of short dollar positions. The market reaction to the payroll data whether it is weak or strong will be very important for underlying dollar sentiment.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."