Friday December 30, 2005 - 10:30:38 GMT
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INVESTICA Ltd - www.investica.co.uk
US housing will remain in focus
The dollar fluctuated in a relatively narrow range against the Euro during Thursday as liquidity remained low. The Euro was blocked around 1.1880 and settled close to 1.1845. Position adjustment will remain significant on Friday and will probably be the dominant influence with no significant economic data due and low trading volumes. The dollar weakened in early Europe on Friday with a move to 1.1880 as the US currency hit selling pressure, but the Euro was unable to gain any momentum.
The US data on Thursday was close to expectations and failed to have a big impact, although the medium-term implications could be more significant. Jobless claims rose marginally to 322,000 in the latest week while the Chicago PMI index fell marginally to 61.5 in December, although this was above market expectations. Existing home sales fell 1.7% to an annual rate of 6.97mn while the number of homes available for sale rose to a 19-year high. The data continues to point to a slowdown in the sector and any sustained weakness in the housing market would be a potentially important and negative influence for the dollar in 2006.
There was a weaker than expected reading for Euro-zone money supply growth which, at the margin, weakened the Euro slightly. Overall Euro-zone confidence should, however, remain firm in the short term with the evidence of a revival in Germany particularly important. There was also a drop in French unemployment while ECB officials have continued to suggest that there will be further interest rate increases early in 2006.
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