NEWS / Foreign Exchange

Dollar fails to find support off FOMC minutes despite bullish inflation forecast for '07

August 30th - The dollar may have found some support ahead of the FOMC meeting minutes yesterday but with no clear messages contained as to where the Fed intends to take interest rates next a prompt reversion back to earlier levels against the majors followed. Without doubt there had been some speculation that the bullish forecasts for US inflation in 2007 may have resulted in at least a marginally more aggressive stance over interest rates being perceived but so far the dollar is remaining on the back foot. With a strong run of economic data still due for release right through to the weekend break, further volatility is probably to be expected but arguably the longer we see the bearish numbers continue for the more demanding the market is going to be if another sustainable rally by the greenback is to be seen. Today??™s GDP numbers will offer some short term momentum but it??™s really going to be tomorrow??™s income and expenditure data then perhaps most significantly Friday??™s non-farm payrolls that stand to provide the most direction ahead of the weekend break. Cable is toying with the psychological 1.9000 line whilst tomorrow??™s ECB rate verdict also has the potential to deliver some strong upside for the common currency. The dollar is now trading towards the lower end of the recent range but unless we see a step change in opinion, the next move could well be lower still??¦

PAUL JACKSON