Tuesday September 27, 2005 - 07:14:03 GMT
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Tricom Futures and Foreign Exchange -
Forex: The USD remains the market's darling
The US dollar was higher in early afternoon trade, supported by overnight comments from US Federal Reserve policymakers who indicated that the Fed has room to increase its key rates further given emerging inflation worries. The remarks, which suggested that the Fed was likely to continue with its cycle of modest rate hikes, were made by Federal Open Market Committee voting members Susan Bies and Michael Moskow. Moskow said there may still be excess capacity in the US economy but inflation is running at the upper end of the Fed's comfort zone.
The EUR ran into stiff opposition around 1.2080 earlier today, and has just broken under 1.2000 in early European trade. We need to see a move back above 1.2100 to suggest this month-long downtrend has been broken.
The market is starting to talk about this USD strength being overdone, and is starting to re-calculate the damage caused by Rita. Later today we have US consumer confidence data, which should show how Mr and Mrs Smith, from Struggle Street feel about the recent rise in fuel, and interest rates. A soft number will see the USD comeback somewhat, and perhaps signal the start of soft US economic data in coming weeks.
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