*Last Updated August 3, 2006, 2:02 am

Daily report by CMC Markets

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FOREX ANALYSIS

Monetary policies in focus as Frankfurt & London declare latest rate verdicts

August 3rd - The economic calendar is set to pick up somewhat today with interest rate verdicts due from both the ECB and the Bank of England. Although these are arguably less significant than next week’s FOMC verdict, the relevant announcements do stand to provide further direction for both Sterling and the common currency in due course. Speculation has been mounting arguably since the July meeting that Trichet will look to add another quarter point today, although slower than expected growth of Eurozone services PMI has injected some doubt into the market and turned EUR/USD slightly softer as a result. Assuming we do see the rate hike come through later in the session then the Euro can probably expect to see some appreciation back towards recent highs especially if accompanying comments are somewhat hawkish but conversely any – arguably surprise - decision to leave rates on hold will doubtless leave the common currency under a degree of pressure. In London there’s little prospect of a rate hike today and although inflationary pressures do seem to be gathering pace in the UK, again the services PMI reading for July showed a downturn over the previous month. Higher rates may remain on the cards towards the end of 2006 but today’s announcements should give the market something to chew on ahead of tomorrow’s US non-farm payrolls and next week’s key rate verdict from the Fed.

Tim Wilbraham and Enis Mehmet



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