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Dollar under sustained pressure after FOMC looks dovish in H2 2006. June 30th - There’s one theme dominating currency markets right now and that’s still last night’s FOMC rate verdict. The marginal speculation that we might see 50 basis points added came to nothing but it would be difficult to say that the fact the Fed only added 25 points to rates is the reason why the dollar has come under so much pressure over the last 12hrs or so. More attention is being put on the fact that the tone of the accompanying comments last night was undoubtedly dovish and the cycle of rate hikes does seem to be nearing an end. As these comments are digested further through the day some stability should start to emerge but with the onus being that further rate adjustments are “data dependent”, expect readings starting with this afternoon’s Michigan consumer sentiment data to come under some intense scrutiny. Japanese numbers released overnight were undoubtedly mixed – construction orders down and housing starts up - but once again this hasn’t detracted from the Yen’s rally against the dollar. Eurozone business sentiment data due ahead of the US market open will also be watched – as always after a run of strong gains traders will be looking for opportunities to start booking profits. Any weakness here could initiate a small reversion but the dollar’s recent grind higher may now be coming to an end… Wayne Roworth 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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