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Dollar remains dominant ahead of US trade data June 9th - Cable may have recovered at least partially off yesterday’s lows but the common currency remains depressed against the dollar as traders mull over the fact that we’re unlikely to be finding any further convergence of interest rates between Washington and Frankfurt over the next couple of months. Clearly the desire to see a 50 point hike yesterday had been a little understated and with the ECB now not scheduled to meet again until August, downside pressures on the Euro are likely to continue unless we see some clear indications from the Fed that their ongoing hawkish stance will end in due course. Without doubt today’s trade deficit data will be closely watched but any reaction to this reading may well prove to be short lived. The issue does now seem to be that it’s very difficult to call the actions of the FOMC much in advance – oil prices have softened of late so assuming progress continues with the Iranian situation, inflationary pressures from high fuel prices – especially with cheaper gas during the summer driving season - could start to retreat too. Signals such as these may prove sufficient to encourage the Fed to soften its approach, perhaps leading the dollar to give up some gains in the short term but undoubtedly benefiting the US economy as a whole in the longer term… Tim Wilbraham 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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