*Last Updated August 25, 2006, 12:09 am

Daily report by CMC Markets

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FOREX ANALYSIS

All eyes on Bernanke after Japanese CPI data disappoints

August 25th - There has been limited direction for currency markets through the Asian session as the majority of traders are instead resigned to sit tight until Ben Bernanke’s speech on inflation at the conclusion of the Fed’s summer retreat. However, Japanese CPI numbers were released overnight and these came in lower than expected, underlining the fragile state of the country’s economic recovery and suggesting once more that further rate hikes out of the Bank of Japan are likely to be some time off. As a result there has been a run of Yen selling, pushing USD/JPY past 117 and back to levels not seen in over a month. Obviously any dovish tones from Bernanke later on could see much of this move reversed but the Yen is certainly where the most significant momentum has been seen of late. Cable continues to swing within a 200 point range just below the key 1.9000 level – there’s clearly some psychological barrier to making another sustained move above this level but again the right message from the Fed later today could initiate further flows from dollars into other major currencies. It might be a quiet start for Europe but the temp will surely pick up as US markets come on line…

Andy Cottrill



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