*Last Updated September 15, 2006, 12:24 am

Daily report by CMC Markets

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FOREX ANALYSIS

US data and G7 meeting set to provide next direction for currencies

September 15th - After yesterday’s shift lower against the European currencies, the dollar has failed to recoup much of its losses but many traders may now see themselves sidelined until the raft of key US economic data is released. Arguably the debate still centers around whether or not the FOMC will look to resume the run of rate hikes at next week’s meeting in an attempt to stamp out any latent inflationary pressures even though there are repeated suggestions that the US economy is already slowing down. Those labor cost figures continue to cause a level of disquiet so really it’s a case of looking at the CPI reading, Michigan Sentiment and also numbers such as Industrial Production before deciding precisely how the Fed will act in due course. Ahead of this there’s only limited economic data expected to come out from Europe so other than posturing there’s little to influence either the Euro or Pound. However Japanese data released overnight – most recently the tertiary index – showed a decline for the second month running, again raising questions as to just how feasible it is for the BoJ to put another rate hike through before the year end. The weakened Yen is set to be a topic of interest at the forthcoming meeting of G7 finance ministers but largely the expectation is that we’ll see some support for the duration of the meeting but unless there are any surprise actions tabled then the currency’s slide may well resume in the early part of next week with 2006 highs for USD/JPY around 119.50 being seen as the next big level by many.

Wayne Roworth



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