*Last Updated January 20, 2006, 1:12 am

Daily report by CMC Markets

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FOREX ANALYSIS

US inflationary pressures remain in focus ahead of Michigan sentiment

January 20th - After a slump for the dollar late in the European session yesterday as traders reacted to news that bin Laden was threatening further attacks on the US, the greenback has now rallied but so far is struggling to break out of ranges that have been running since earlier in the week. Inflationary pressures are without doubt continuing to lend support to the dollar – yesterday’s weekly jobless claims showed a tightening in the labor market that may soon become somewhat uncomfortable for the FOMC, and in this same light the Michigan consumer confidence reading will be closely watched when released later today. Obviously with crude now trading around the $67 mark this will soon have a knock on effect for gasoline prices and in due course US CPI, although such a move may be somewhat short lived. Current premiums are being dictated by specific supply threats which in due course should be resolved, but with these factors combined it’s going to make it a difficult call for the FOMC at the next meeting at the end of the month. Essentially the dollar could go either way and as a result many may be cautious of holding significant positions in either direction…

Paul Jackson and Enis Mehmet



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