Monday July 5, 2004 - 10:09:32 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
Fragile dollar correction likely
The weak US payroll report will unsettle the dollar by lowering interest rate expectations. A period of consolidation will also be needed with a shallow Euro correction towards 1.2270 likely, but the Euro should then be able to make a challenge on 1.2350. A break here will be tough initially with Euro buying not strong enough, but a break would increase speculation of an eventual move to 1.25.
The Euro/dollar rate finally achieved a break of existing ranges as dollar selling was triggered by the June payroll report. The headline employment increase was much weaker than expected at 112,000 compared with expectations of a 240,000 increase while the May and April figures were also revised downwards. The dollar dipped to a low of 1.2335 against the Euro and remained weak in early Europe on Monday although the dollar was attempting a correction.
The poor employment data and other recent evidence of a slowdown in the industrial sector will lower US interest rate expectations. Another reversal in sentiment is always possible markets are now signaling a very low chance of a 0.5% interest rate hike for August. The downgrading of rate expectations will tend to undermine the US currency, at least in the short term.
ECB chief economist Issing took a relatively tough line on inflation in comments over the weekend, stating that inflation was stubbornly high above the 2.0% target. This will reinforce speculation that a rate cut is off the cards. The Euro-zone PMI index dipped slightly to 55.3 in June from 55.8 the previous month.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."