Friday July 1, 2005 - 07:19:39 GMT
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CMC Markets - www.cmcmarkets.com
FOMC verdict points towards further rate hikes; dollar continues to gain ground.
July 1st - Although last night’s rate hike by the FOMC had been widely expected and was already factored into currency markets, the accompanying comments suggesting the measured tightening of monetary policy will continue through the second half of 2005 has been sufficient to drive the dollar sharply higher overnight. The pound failed to recover from yesterday’s slide and starts today well below the key 1.80 mark, this being seen by many as leaving the downside further exposed in the coming days. Furthermore, the Yen has also breached 111 against the dollar, this coming despite a strong showing in the tankan survey of corporate sentiment, released by the Bank of Japan overnight. With oil continuing to trend lower, earlier concerns about its potential impact on the US trade deficit are fading, so as the new month gets underway, there seems to be little around to put the dollar under pressure. Michigan sentiment data due for release later in the session may provide some direction, as expectations are for either an unchanged or slightly softer figure than was seen last month. Any bigger shortfall however may be sufficient to encourage traders to book some profits although once we’re into next week, the key number will be Thursday’s non-farm payrolls where failure to post a marked improvement on the May figure could initiate something of a correction.
Nas Nijjar and Enis Mehmet
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