Wednesday August 17, 2005 - 08:11:23 GMT
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CMC Markets - www.cmcmarkets.com
US consumer sentiment rattled by high oil prices but inflationary pressures continue to mount.
August 17th - After a difficult run, the dollar is now gaining ground across the board after the release of some solid economic data over the last couple of days. Although consumer sentiment in the US is becoming somewhat rattled by the high price of fuel, the rally here has been so bullish that there has been also been a direct impact on inflation and this in turn is going to further suggestions that the FOMC will stick with its current hawkish approach to interest rates as we move towards the end of 2005. PPI data due for release later in today’s session should underline these sentiments as manufacturers start to feel the impact of higher raw material and transport costs, again stemming from oil prices becoming established at these higher levels. Furthermore, the significantly better than expected TIC data released on Monday has also succeeded in overshadowing many concerns – and the associated downside pressures on the greenback - regarding the fact that the US trade balance remains so far into the red. Obviously we’ve seen a significant correction on the dollar against the major currencies since June. Whether this momentum will prove sustainable in the longer term remains to be seen but there’s mounting opinion that the latest wave of dollar selling may be coming to a close.
Nas Nijjar and Enis Mehmet
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