*Last Updated August 13, 2006, 11:43 pm

Daily report by CMC Markets

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FOREX ANALYSIS

Focus on Europe as inflationary pressures could expose dollar

August 14th - With little economic data of note due for release from either the US or Japan today, attention will instead be focused on the numbers due from Europe. Eurozone GDP is expected to offer some suggestion as to when the ECB will look to hike interest rates once again – inflationary pressures clearly remain within the trading zone and although softer oil prices may help temper this aspect, expectations remain that we’ll see tighter monetary policy before the year end. Furthermore, UK PPI data is also due for release today – the Bank of England’s recent hike in interest rates won’t have had time to impact on supply just yet, but again any suggestion that higher commodity prices will start to filter through to the high street could leave some looking for another hike in rates at the MPC in the not too distant future. The Israeli ceasefire also stands to pressure the dollar - assuming of course that the agreement proves workable. The greenback had been sporting something of a war premium given the currency’s perceived safe haven status so this certainly stands to remove some buying support and if we start to see a repatriation of funds, further downside exposure is probably to be expected in due course.

Stuart Scrase and Enis Mehmet



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