US housing stats weigh on dollar, real attention focused on next week’s FOMC.
June 21st - News that the US housing market is slowing seems to have taken the edge off the latest dollar gains despite ongoing concern as to just how long the hawkish stance over rates will continue for at the Fed. Indeed these sentiments have successfully overridden concerns such as a drop in Japanese business sentiment - which may stand in the way of the more hawkish approach BoJ Governor Fukui wants to see taken over interest rates – with the Yen continuing to hold onto yesterday’s gains through the overnight session, although there has now been a slight reversion away from USD/JPY lows of around 114.4. It may well be however that aside from some general posturing, a degree of churn is likely to continue until next week’s FOMC meeting. The market has arguably priced in another 25 basis point hike here, but it’s going to be the tone of the accompanying comments that stands to provide the next real direction for currency markets. Ahead of this, Friday’s US durable goods orders will be worth watching – another negative number here may add to pressure at the Fed to take a more dovish approach but so long as inflationary pressures remain on the back of factors such as high commodity prices, Bernanke and his team will be left with the same dilemma.
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