Monday October 10, 2005 - 06:27:29 GMT
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CMC Markets - www.cmcmarkets.com
Dollar finding further strength on inflationary fears although medium term outlook remains mixed.
October 10th - The dollar continues to build on recent gains after further comments from the Fed at the end of last week suggested once again that there’s going to be no let up in the hawkish stance over interest rates. Oil prices are also retreating and although we’re still holding clear of the $60 level, again this starts to remove some of the pressures associated with the wider trade deficit - as a net importer of oil, the impact of falling crude prices certainly does favour the greenback. US markets may be a little quiet today with the Columbus day holiday, although data due out of Europe stands to provide some momentum and once more could serve to break the recent run of gains. UK PPI numbers will be used as an indication to once again look for inflationary pressures. There are strong arguments as to why the Bank of England can’t hike interest rates just yet, but another sharp jump here does risk putting the country’s CPI reading above the critical 2.5% level. Elsewhere in the EU, output data from France and Germany is due – the common currency is once more clear of the 1.20 level but a strong reading here could extend the upside. Overall however, as the new trading week gets underway any precise direction still seems difficult to find.
Paul Jackson and Enis Mehmet
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