Thursday November 24, 2005 - 11:50:50 GMT
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INVESTICA Ltd - www.investica.co.uk
Uncertainty hampers dollar
The dollar will still be unsettled slightly by the Tuesday FOMC minutes, although the US currency was able to gain some support from the fact that the Fed will continue to tighten policy in the short term. There was also a suspicion that markets had over-reacted on Tuesday, but the minutes could still prove to be an important watershed for the currency. The underlying market position will be more balanced than in recent weeks given that there is a strong probability of a Euro-zone interest rate increase in December. The fact that an end to US rate increases could be in sight will also tend to lessen dollar buying interest.
The US data was mixed and failed to offer major direction. There was a bigger than expected increase in jobless claims to 335,000 in the latest week, but the overall evidence suggest that the labour market is still firm. The University of Michigan consumer confidence index increased to a final 81.6 for November from a provisional 79.9. Given that there will be a greater element of uncertainty over US interest rate trends following the Fed minutes, the markets will be more sensitive to near-term growth indicators. The dollar will be vulnerable to further selling pressure if there evidence of weaker consumer spending. The principal feature is likely to be increased uncertainty and the potential for volatile trading as rate trends are debated.
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