Tuesday November 15, 2005 - 06:19:16 GMT
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Tricom Futures and Foreign Exchange -
Forex: Stop worrying about the US Trade deficit, and buy the USD
The US dollar was trading stronger against the major currency pairs, but range trading is likely until early December when the US dollar may jump again on yield support. The US dollar gained support overnight following comments by Austrian Finance Minister Karl-Heinz Grasser that he did not see inflation risks within the EU, making it unnecessary for the European Central Bank to hike higher interest rates.
Federal Reserve chairman Alan Greenspan spoke overnight, commenting the record US current account deficit coincides “with a pronounced new phase of globalization”
He said interest rate increases, exchange rate adjustments or cuts in the US fiscal deficit will unlikely lead to large reductions in the current account, which is essentially a market phenomenon
Greenspan added that although the rising US deficits "cannot persist indefinitely", the flexibility of the US economy will absorb any shocks and cushion any fall-out from a slowing of capital flows into the US.
Overnight comments suggest a couple of things- the ECB is not hiking rates before the end of the year, and the US is not concerned about the Trade deficit, thus allying market fears of the current USD rally coming to an end sometime soon.
All this confirms what we've been suggesting for a few weeks now. That is, that the USD rally will continue into the new year, the Euro will head lower before any sign of a recovery, and the Yen is heading much lower as well.
Today's Economic Release:
US: Empire State manufacturing
US: Retail Sales
Today's Top Trades
- Sell EUR/USD around 1.1720-30
- Sell GBP/USD around 1.7420
For more ideas send me an email, [email protected]
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