Thursday January 12, 2006 - 10:50:14 GMT
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INVESTICA Ltd - www.investica.co.uk
Dollar faces crucial day
Thursday will be a very important day for the markets with key US and Euro-zone events. The net risks are likely to be dollar negative, although the threat of further dollar losses will be lessened if the US currency has a weakening trend going into the data.
The US trade deficit for November will be a crucial test for sentiment and, although there should be some improvement from the record deficit in October, it is doubtful whether the improvement will be sufficient to boost dollar confidence. It is also the case that a record deficit would be likely to trigger heavy selling pressure on the dollar.
The ECB will also announce its interest rate decision on Thursday and there is little chance that interest rates will be increased again from the current 2.25%. The news conference after the meeting will, however, offer important evidence on the bank’s first-quarter intentions and the most likely outcome is that the bank will signal a firm stance. Hints over a first-quarter increase would offer background Euro support.
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