Thursday February 17, 2005 - 12:00:19 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
Greenspan maintains uncertainty
Greenspan's comments to congress were fairly subdued during Wednesday. The Fed Chairman stated that interest rates were still low and the remarks continued to suggest that the Fed will follow a path of steady US interest rate increases, especially with concerns that productivity growth is slowing. There were no suggestions of an acceleration in the pace of tightening or a pause. Greenspan repeated his recent comments that market forces were set to stabilise and eventually reduce the current account deficit, although he also warned over the need for budget restraint. Overall, the comments will not be strong enough on interest rates or optimistic enough on the US deficits to trigger strong dollar buying interest and the impression given is that Greenspan is uncertain over likely US economic developments or wants to retain the element of uncertainty. The second part of the testimony today will be important to see if he chooses to emphasise inflation risks and whether he takes a more optimistic stance on the US current account deficit.
The yield spreads on US bonds over German bunds will offer some support to the US currency with yield spreads currently at around 60 basis points. The overall uncertainties will, however, increase the potential for range trading with markets uncertain over dollar direction. In particular, current levels are crucial in determining whether the price action over the past two weeks is a correction from dollar gains or whether it is the start of a fresh dollar downturn. Losses through 1.3070 would increase the risk that the US currency is embarking on a fresh downturn.
The US economic data received little attention with industrial production unchanged in January compared with expectations of a 0.3% increase. Housing starts, however, rose by over 4% in the month to a 21-year high. Low bond yields are continuing to offer support to the housing sector and, while bond yields remain low, there is the risk that the Fed will have to tighten monetary policy more aggressively.
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."