Tuesday June 28, 2005 - 09:57:37 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
Key dollar battle ahead
The Euro secured a slightly stronger tone during Monday as selling pressure on the currency eased. The Euro was unable to push above resistance at 1.2190 and the Euro weakened to 1.2135 in early Europe on Tuesday before further losses to 1.2105.
There were rumours of central bank Euro buying interest near to current levels as they now consider that the Euro offers more solid medium-term value after the sharp losses seen during the second quarter. There is the potential for a further increase in central bank Euro buying around the 1.20 level. A break below this level would, however, risk an increase in institutional Euro selling, reinforcing the importance of this level for the market tone over the next few weeks. There is likely to be a tough battle at 1.20.
ECB officials have continued to dismiss speculation over a cut in interest rates and the money supply growth is also stronger than expected with an increase to 7.3% in the year to May from 6.8% the previous month. The ECB will also be concerned over the level of oil prices and is likely to keep rates on hold in the short term. Markets will, however, still be looking for a reduction in rates over the next few weeks which will hurt the Euro.
Oil prices will remain very important with prices pushing to fresh record highs above the US$61 p/b level on Monday. Prices at this level, if sustained, will start to damage the dollar's outlook as there will be growing speculation over a slowdown in the US economy. Despite the concerns over inflation, the most likely outcome is that the Fed would be more likely to put interest rates on hold due to fears over growth if oil prices remain high. There is, however, a high probability that the Fed will decide on a further 0.25% rate increase this week, reinforcing the dollar's near-term interest rate advantage.
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."