*Last Updated November 25, 2005, 1:06 am

Daily report by CMC Markets

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FOREX ANALYSIS

Disappointing Japanese CPI buoys dollar; cable traders await UK GDP data

November 25th - The dollar has trended higher through the Asian session despite an absence of news from the US markets which have been closed for the Thanksgiving holiday. Although trading will resume today, many are likely to stay out of the market until next week and there’s little on the economic calendar other than yesterday’s delayed weekly jobless figures so further meaningful direction may prove difficult to find. One item of note that was released overnight was Japanese CPI which failed to show any inflationary pressures despite the fact that expectations were suggesting otherwise. Once again this is pushing the Bank of Japan’s plans to start tightening monetary policy back somewhat and the return in USD JPY to above 119 is clearly linked to this news. Oil prices continue to work sideways, up from recent lows but still some way short of the $60 level. A successful test of this point would doubtless raise further concerns over attempts to narrow the US trade deficit, putting further pressure on the dollar in due course. Cable is also trading comfortably above the weekly lows although GDP data due for release imminently could provide further direction here – over the last quarter there’s been a significant unwinding from the 1.85 level and although interest rate differentials alone still suggest there might be more room for manoeuvre on the downside, the extent of any sell-off in the short term remains to be seen…

Stuart Scrase and Enis Mehmet



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