Tuesday June 15, 2004 - 09:15:02 GMT
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INVESTICA Ltd - www.investica.co.uk
Next 24 hours vital for dollar
The next 24 hours will be very important for the US currency with inflation figures, testimony from Greenspan and capital flows data. High inflation figures and a hawkish testimony from Greenspan would tend to boost the US currency, but the markets will still be unsettled by trade deficit and financing fears. A headline inflation rate below 0.4% would be likely to weaken the dollar towards 1.2150, and volatility will be a high risk in US trading.
The US trade deficit widened to a record US$48.3bn in April from a revised US$46.6bn the previous month and compared with market estimates of a US$45.0bn deficit. There will also be some concern that the deficit widening was not primarily due to high oil prices. The retail sales report was slightly stronger than expected with a 1.2% increase.
The data and comments today will be very important for the dollar. As far as the inflation data is concerned, a core inflation rate increase of more than 0.3% and a headline rate above 0.5% would increase speculation of a more aggressive Fed tightening. Testimony from Greenspan and other Fed officials will also be crucial and if Greenspan does not emphasis a measured approach there will be renewed speculation over a 0.5% rate increase at the end of June The US capital account figures will be important to assess whether the US has the potential for increased private-sector inflows to offset the impact of lower official inflows.
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