Thursday March 2, 2006 - 11:06:03 GMT
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INVESTICA Ltd - www.investica.co.uk
Markets braced for Trichet
The Euro pushed to 1.1975 against the dollar on Tuesday, but retraced gains in New York and weakened to lows just below 1.19 in New York before stabilising. The Euro recovered back to 1.1925 in early Europe on Thursday, but a firm stance will be needed to trigger significant Euro gains.
The US ISM data offered some relief to the dollar after the disappointments seen on Tuesday. The index for the manufacturing sector rose to 56.7 in February from 54.8 the previous month as orders and employment strengthened. The core PCE inflation figure within the spending data was also in line with expectations with the annual rate falling to 1.8% from 1.9%, the lowest rate for close to two years.
There was also a weak figure for construction spending which will create some unease over the sector and low core inflation data will give the Fed greater scope to suspend interest rate hikes if there are increased doubts over growth trends.
Attention will turn to the ECB decision and press conference on Thursday with markets looking for a 0.25% increase in interest rates to 2.50% and this looks highly likely. Trichetâ€™s comment on future policy will be particularly important for the Euro and the ECB Chairman is likely to suggest a further gradual increase in interest rates.
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