*Last Updated December 1, 2005, 4:27 am

Daily report by CMC Markets

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FOREX ANALYSIS

Currencies poised for ECB verdict and new-month economic data

December 1st - Traders may have already factored a 25 basis point rate hike from the ECB today into currency prices, although there’s going to be a lot of attention focused on the bank’s accompanying comments. The market is really going to require some solid signals that this won’t be a one-off hike and consensus appears to be that unless there’s a suggestion that at least a further 50 basis points will be added through 2006 then the common currency may be left looking somewhat exposed on the downside. There’s also a raft of economic data due from the US through today’s session and again much of it stands to provide some direction as to where inflation will likely go in the early part of 2006. Data released in the last few days has caused a degree of concern as to just how much further the Fed will have to hike its rates to keep spending in check so the income and expenditure readings could provide additional momentum here for the greenback. In light of this however, the Yen is suffering against both the USD and EUR. There is still little prospect of monetary policy tightening in Japan and the interest rate differential is set to keep the JPY under pressure. Bullish readings from the US today may well be sufficient to push USD JPY past that key 120 level for the first time since Aug 03

Tim Wilbraham and Enis Mehmet



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