*Last Updated November 30, 2005, 1:24 am

Daily report by CMC Markets

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FOREX ANALYSIS

Markets set for Euro rate hike although implications may be damaging in New Year

November 30th - Additional robust economic news coming out of the Eurozone – including French unemployment falling to a two year low and an increase in German wholesale sales - appears to be firming consensus amongst traders that the ECB will see fit to add 25 basis points to interest rates at tomorrow’s meeting, marking the first change of monetary policy by the bank since early 2003. This sentiment has been reflected in currency markets over the last few days with the rate hike probably being fully factored into prices now, although there is some concern that higher borrowing costs may immediately hamper the economic recovery which has been somewhat drawn out. These concerns hold especially true in Germany where the prospect of higher tax rates under the new administration will likely impact during 2006 although opinion does seem to suggest that this hike will be very much a one-off – at least for the time being. As a result of this there’s going to be little to stop the dollar from posting further gains against the common currency as we move towards the year end and on into the New Year, simply on the back of the interest rate differential.

Stuart Scrase and Enis Mehmet



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