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Daily Forex Strategy Briefing

Dollar Is Flat After Fed Minutes

Thu, Nov 16 2006, 01:28 GMT
by Hans Nilsson

CMS Forex  |  View company's profile


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• The dollar was mixed on Wednesday, higher against the yen and sterling but lower against the euro. The FX market did not move much after the minutes from the Federal Reserve's October 25 rate-setting meeting showed the Fed remained concerned about inflation. Earlier the greenback gained as a stronger-thanexpected New York area manufacturing report eased fears of a deepening US economic slowdown. The FX market awaits TICS and CPI data tomorrow.

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Financial and Economic News and Comments

US & Canada
• More concerned about inflation risks than recession risks, the Fed said in the minutes: “Most members judged that the downside risks to economic activity had diminished a little….All members agreed that the risks to achieving the anticipated reduction in inflation remained the greatest concern.”

• Interest-rate futures prices indicate traders see a 17% probability the Fed will reduce borrowing costs at its March 21 meeting after the release of the Fed minutes. The probability of a rate cut had been slightly higher before the release.

• The New York Federal Reserve’s index measuring manufacturing activity in District rose from 22.92 to 26.66 in November. New orders posted a sharp rise from 11.75 to 22.38 in November and shipments went up to 26.63 in November from 22.54. Inventories rose to 3.77 in November. The prices paid index climbed to 34.90 in November while the prices received index decreased to 16.98.

• According to US Commerce Secretary Carlos Gutierrez, Democrat-led US Congress may be tougher on trade issues with China despite early signs of cooperation with the current administration. The US election results indicated that Americans pushing for more open global markets may face increased challenges at home, Gutierrez said.

Europe
• Bank of England Governor Mervyn King warned again that he is likely to have to write a letter to Chancellor of the Exchequer Gordon Brown over the coming 2 years explaining why inflation has deviated by more than one percentage point from the 2% target.

• Eurozone’s Industrial output slowed more-than-expected in September, mostly as a result of drop in consumer durables, the European Union statistics agency Eurostat said. Industrial output fell 1.0% m/m but rose 3.3% y/y.

Asia-Pacific
• The Australian Bureau of Statistics (ABS) said the wage cost index (WCI) for the Q3 to September rose a seasonally adjusted 0.8% q/q, 3.8% y/y. The Q2 WCI rose 1.1% q/q.

• Japan’s tertiary index, measuring spending in the services sector, dropped 1.3% in September from the previous month, reflecting weak wholesale and retail sales, the Ministry of Economy, Trade and Industry said.

• The Chinese Ministry of Commerce said in a statement that actual foreign direct investment (FDI) in October rose 15.92% y/y at $5.99b.

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Published on  Thu, Nov 16 2006, 01:35 GMT


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