Wednesday September 28, 2005 - 09:57:06 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
The dollar pushed to highs near 1.1975 after a break down below 1.20, but was still unable to make a convincing break of the 1.20 level and the US currency retreated to 1.2030 in early Europe on Wednesday.
The US economic data was weaker than expected with consumer confidence falling sharply to 86.6 in September from 105.5 the previous month while there was also a drop in new home sales for August to 1.24mn. For now, the markets are still convinced that the Federal Reserve is looking to increase interest rates further and is, therefore, able to consider the weak data as a temporary function of damage caused by the hurricanes. It will be much more difficult to ignore the evidence if there is a sustained downturn in confidence and spending indicators during October.
The comments from Fed officials supported expectations of higher interest rates with Fed Governor Yellen, for example, stating that the Fed must deliver on price stability. There have been clear suggestions that the Fed is concerned over inflation and will be looking to increase interest rate again during the fourth quarter. The yield considerations will offer near-term support to the dollar. It is, however, dangerous to assume that the dollar will automatically benefit from rising interest rates, especially if inflation expectations rise or there is evidence that tighter policy is hurting growth.
Fed Chairman Greenspan avoided making direct comments on Fed policy, but he did warn over the risk of complacency over interest rate levels and wider risk premium levels. Greenspan also remained concerned over the implications of a serious weakening in the housing sector and there will be a risk that dollar risk premiums will increase, especially if gasoline prices remain at high levels.
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."