The bounce back may have been simply due to short term profit taking or perhaps concern by some traders that tomorrow's Trade Balance deficit expected to reach -$66.5 Billion could refocus attention on US's deteriorating Balance Sheet position. If the TICs report due out next week, does not show a large enough surplus to offset the trade data, it would be the second consecutive month of such shortfall and could rekindle the same worries about the long term structural viability of US debt financing that plagued the dollar in the second half of 2004.
On the Fedspeak front, Chicago President Moskow appeared to echo comments by William Poole the day earlier that the Fed was prepared to err on the side of caution with respect to monetary tightening. However, Mr. Moskow did temper his message by stating that the Fed will be far more sensitive to future US economic data again putting the onus on this Friday's NFP number. It is clear that US monetary authorities continue to be bullish on US economic prospects, and should their opinion prove accurate, the dollar may have further room to run.
In the meantime, positive data from Japan and UK halted the dollar rally as the Eco Watchers Survey in Japan recorded a reading of 53.5 comfortably above the 50 boom/bust level while the UK Nationwide survey showed that prices in UK 6 Trillion dollar housing market rose at the fastest pace in 6 months.
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Good News from UK and Japan Halts the Dollar Rally
- Wednesday, March 08 - 2006 at 15:29
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On a very lean calendar day with absolutely no news flow from either the EU or US, the EUR/USD recouped some its losses after giving up more than 160 points against the greenback yesterday in an uninterrupted bout of selling.
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Boris Schlossberg, Senior Currency Strategist, Daily FXWednesday, March 08 - 2006 at 15:29 UAE local time (GMT+4)
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