Thursday August 12, 2004 - 09:44:33 GMT
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INVESTICA Ltd - www.investica.co.uk
Dollar waits for retail evidence
There will be further caution in the short term due to uncertainty over US growth trends. The US retail sales data today will have a significant with the possibility of high volatility. Overall, long dollar positions still offer little value stronger than 1.22. Euro gains are likely to be capped around 1.2320 unless the US data is very weak or there is an escalation in security fears. The net long-term risks still look to be for dollar depreciation.
The Euro dipped to just below the 1.22 level against the US dollar, but there was little in the way of follow-through dollar buying and the Euro pushed back to 1.2255 on Thursday.
The markets will remain cautious in the short term with doubts whether the Fed optimism this week is justified. This mood of uncertainty will be heightened by the economic continuing strength of oil prices. Sustained strength in oil prices could eventually slow the economy sharply and there will also be doubts over Wall Street.
The markets will remain anxious for further growth evidence to asses the US trends. The initial focus will, therefore, be on the US retail sales and jobless data today. The focus on retail sales is potentially difficult as it is an erratic figure. The dollar is likely to need monthly growth of at least 1.0% to make progress. A figure below 0.6% would be damaging for the US currency, especially if non-auto sales weaken.
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