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Dollar remains downbeat after Friday’s slower growth forecasts July 31st - Friday’s slowdown in US growth pushed the dollar lower across the board and since then there has been little around to provide any significant additional direction for the major currencies. With only limited economic data due ahead of the month end – the bulk of numbers will be seen starting tomorrow – it’s going to be readings such as the Chicago PMI and Eurozone sentiment that stand to offer direction through today’s session. The prospect of a resolution to the Middle East conflict may further pressure the dollar which had been factoring in something of a war premium on the back of its safe haven status, but otherwise it’s going to be ongoing speculation over monetary policy that looks set to dominate traders’ thoughts. The ECB meet this week and many are now of the opinion that a quarter point will be added to keep inflationary pressures in check although the outlook beyond this remains somewhat and in the longer term it’s going to be next week’s FOMC meeting that seems set to become the focus of attention. The chance of another rate hike by the Fed has been further discounted of late but with a raft of economic indicators due at the start of August, once again expect the market to be looking closely at the data. Any suggestion of inflationary pressures could initiate further short-term dollar buying although it would doubtless take a run of bullish readings to shift consensus to yet another rate hikes becoming more of a certainty. David Hutchings and Enis Mehmet Phone USA: + 1 212 644 4220 Phone UK: + 44 207 170 8201 Fax USA: +1 212 644 4222 Website: http://www.cmcmarkets.com
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