Downbeat German GDP punishes Euro, traders eyeing UK CPI and Japan economic index
February 14th - The dollar may have shed some of the recent gains as traders engage in short term position keeping, but overall the prospect of further hawkish comments from the Fed - combined with economic data that may well reinforce the fact that inflationary pressures remain an issue in the US – may well leave the greenback in a strong position over the coming days. Furthermore, there’s been some economic data from Europe that has been less than inspiring – German GDP surprised many by unexpectedly coming in unchanged when comparing the last two quarters of 2005, leaving the common currency to retreat from earlier highs around the 1.1920 region. UK CPI numbers due in the next couple of hours will therefore be closely watched, with any suggestion that the British economy is slowing likely to further calls for a prompt rate cut at the Bank of England and in turn leave cable under further pressure. In Asia the Yen has managed to continue posting incremental gains as data released overnight from Tokyo showed a modest upturn in department store spending and also a more pronounced drop in corporate bankruptcies. Again this points towards the Bank of Japan soon moving into a position where interest rates can start to edge higher, in turn providing some support for JPY. The leading economic index due tonight will also be closely watched and assuming a robust figure is posted here further gains may be seen in the short term, but overall interest rate expectations are once again dominating currency trends…
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