*Last Updated December 20, 2005, 1:25 am

Daily report by CMC Markets

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FOREX ANALYSIS

Economic newsflow slows; monetary policy back in focus.

December 20th - The greenback is continuing its rebound from recent lows as consensus mounts in the market that the recent sell-off may have been too severe. Economic data to provide fundamental support remains somewhat thin on the ground, although US housing numbers and the latest producer price index reading will both be closely watched when released later in the session. These numbers have a clear correlation to inflationary pressures and as a result may provide some further indication as to where the FOMC will take interest rates next. The overall sentiment remains that dollar yields need to start slowing soon, but just how many rate hikes are left is still a matter of some debate. The Bank of Japan monetary policy meeting minutes are also due for release towards the end of the day and again these will be closely watched for any suggestion as to when Tokyo will finally initiate a series of rate hikes. Tangible signs of recovery continue to creep into the market and assuming that data such as November’s unemployment and CPI readings continue to reflect this theme (both due next week) then the Yen can expect to find at least a little support although the dollar may well be poised to make some incremental gains ahead of the year end regardless of tonight’s BoJ data…

Stuart Scrase and Enis Mehmet



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