*Last Updated August 10, 2006, 1:04 am

Daily report by CMC Markets

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FOREX ANALYSIS

Terror concerns inject volatility ahead of US numbers

August 10th - Renewed fears of global terrorism have injected a degree of volatility in early European trade but overall the mood in currency markets remains relatively subdued. There are still a host of US economic readings due ahead of the weekend break and with traders still trying to decide where the Fed will take interest rates next, these numbers could prove instrumental in setting the tone at least in the short term. Today’s weekly jobless claims will be seen by many as another indicator as to the strength of the economy – a sharp jump here would add further validity to the theory of a slowdown and start to turn many away from thoughts of a resumption of the Fed’s hawkish mood in September. A similar analysis will doubtless be carried out on tomorrow’s US retail sales data but at least the weaker dollar should bring some cheer for the trade deficit, so again this reading can expect to attract a degree of attention once released. Elsewhere there’s consensus that central banks outside the US will continue tightening interest rates – South Korea adding a quarter point overnight too – but again it’s the exact pace of change that will be dictating market sentiment.

Tim Wilbraham and Enis Mehmet



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