Monday June 13, 2005 - 09:54:09 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
The Euro edged slightly stronger against the US currency ahead of the US trade deficit on Friday, but the Euro was subjected to fresh selling pressure after the data and weakened to a low near 1.21. The Euro also weakened to a low of 1.2035 in Europe on Monday.
The US trade deficit widened to US$57.0bn for April from a downwardly revised US$53.6bn in March. The figure has eased fears over the deficit to some extent as markets had been expecting a higher deficit close to US$58bn and were fearing a deficit above US$60bn. The deficit was, however, still the fourth-worst on record and the deficit still rose by 22% for the first four months of 2005. The market's reaction was more due to weak Euro sentiment and the price trends following the data will reinforce the negative Euro sentiment. Euro confidence will remain very weak in the short term and it will be difficult to secure near-term relief, but some caution is required as sentiment is becoming extreme.
The dollar will continue to gain support from near-term interest rate expectations. Market speculation over a Fed pause in tightening has eased following Greenspan's testimony last week while speculation over a cut in Euro interest rates will continue. The yield spread on dollars over Euros widened to 90 basis points on Friday and this will offer near-term dollar support. The US inflation rate on Tuesday and Wednesday will be important for interest rate expectations and the US currency.
The latest IMM data recorded a small decline in short Euro positions of around 500 contracts in the latest week, cutting the short position to just below 18,000, although this was still the second-highest short Euro position since 2002. The overall long dollar position was also the second-highest since 2000, reinforcing the fact that the US currency could be vulnerable to a significant correction.
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."