NEWS / European Community

Dollar waits for inflation evidence

The dollar remained under pressure ahead of the US data releases on Thursday and weakened to lows around 1.2770 before recovering back to 1.2690 in early Europe on Friday.

The US data was generally close to consensus forecasts, reinforcing optimism towards the industrial sector and expectations over a slowdown in the housing sector. US durable goods orders rose 3.1% in June with a 1.0% underlying increase. New home sales fell 3.0% to an annual rate of 1.13mn and there was an 11.9% annual drop in sales. Jobless claims fell to 298,000 in the latest week from 305,000 and if the labour market remains firm, there will be a much reduced risk of serious stresses in the housing sector.

The GDP and employment costs data on Friday could still have an important impact on expectations with the inflation data also under close scrutiny. The markets will look to sell the dollar again if the inflation data within the GDP report is subdued. The weight of existing long positions will still be an important barrier to strong Euro gains.