*Last Updated April 20, 2006, 12:00 am

Daily report by CMC Markets

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FOREX ANALYSIS

Inflation remains key factor to watch as dollar retreats

April 20th - Yesterday’s marginally better than expected US CPI reading caused a brief hiatus in currency markets, pushing the dollar temporarily higher on the back of the news but these gains have since proved to be short lived. We’ve seen a complete reversion against the majors as the fact that the run of FOMC rate hikes will soon be coming to a close is dominating and starting to weigh on the dollar, even though higher oil prices look set to keep inflationary pressures in focus in the months ahead. Today’s US leading economic indicators may also be able to provide some additional direction, but it would seem that one of the few ways the dollar will find any real additional upside in the near term is through some emerging weaknesses with the opposing currencies. There’s little else on the economic calendar today, but UK CPI data could undermine cable if there’s any suggestion of some contraction here. Speculation has been building that the Bank of England seems unlikely to touch interest again rates before the second half of the year, although there’s still no absolute consensus emerging over which way rates will move next…

Tim Wilbraham and Enis Mehmet



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