*Last Updated August 7, 2006, 11:54 pm

Daily report by CMC Markets

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FOREX ANALYSIS

FOMC verdict set to dominate day’s session

August 8th - It’s very much a case of all eyes on the Fed as we approach today’s much-awaited FOMC meeting. Markets are certainly expecting rates to be left on hold this time around but as is often the case it’s going to be the tone of the accompanying comments that really sets the agenda through the latter part of the week. Any suggestion that today’s anticipated pause may be just a one-off could see the dollar recover some of its recently lost ground but with central banks elsewhere now embarking on a run of monetary policy tightening, significant upside may well prove difficult to find. The Euro is however looking a little weaker right now with EUR/USD failing to hold onto last week’s test of 1.2900. Yesterday’s disappointing retail PMI reading from the Eurozone are clearly adding to pressures on the downside and may be suggesting that the ECB needs to revisit when it will next be prudent to tightening interest rates further after last week’s jump to 3%. Furthermore, a contracting German current account surplus released in the last few minutes is also suggesting that exporters in Europe’s largest economy is suffering from the strength of the Euro – something that will only get worse if we see rates converge further between Washington and Frankfurt…

Tim Wilbraham and Enis Mehmet



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