*Last Updated August 15, 2006, 11:53 pm

Daily report by CMC Markets

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FOREX ANALYSIS

Dollar knocked by PPI data, CPI reading awaited

August 16th - The dollar lost ground across the board yesterday on the back of the worse than expected PPI and Empire State manufacturing numbers although since then there’s been little around to direct currency markets. Attention now seems to be firmly fixed on today’s US CPI reading, with the market looking for some consensus to build over yesterday’s data. Obviously any signs of a slowdown stand to further pressure the dollar in the near term although the picture emerging from elsewhere is giving other currencies little reason to be upbeat right now either. The release of the Bank of Japan meeting minutes has underlined that a cautious mood over further rate hikes is prevailing in Tokyo, although with the leading index for June having been revised higher overnight, it’s clear that the threat of inflation will need to be carefully managed. Elsewhere there’s also a raft of UK data slated for release in the coming hours. Again this will be analysed as traders try to figure out how the Bank of England will handle its monetary policy in the coming months. Unemployment and average earnings will again offer some suggestion as to where inflationary pressures may be coming from – yesterday’s UK CPI reading was certainly lower than expected but unless this is reflected in the days ahead, the market may well remain somewhat bullish on cable.

David Hutchings



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