Dollar consolidates ahead of Michigan statement, FOMC and Tankan.
December 9th - After profit taking later in yesterday’s session against the dollar, markets appear to be looking at extending the run of consolidation up to the weekend. Michigan consumer sentiment data could provide some additional direction in the shorter term, but the dollar’s run of gains through 2005 may now come to an end as consensus starts to build that the FOMC’s hawkish stance over interest rates must change at some point in the coming months. The Fed meet again next week and a 25 basis point hike is seen as very much a given, but it’s going to be the accompanying comments that attract the most attention. It’s doubtful that this will mark the last of the rate hikes, but consumers and industry will likely start to feel the pressure in due course. Additional key economic indicators due next week – including UK inflation data and the Japanese Tankan survey – should ensure that currency markets aren’t completely devoid of activity ahead of the Christmas break, but it would seem doubtful that either piece of information could initiate a significant move higher for the greenback in the short term.
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