Currency news - Dollar on Fed watch

Dollar on Fed watch - 17-09-07

With the dollar unable to break resistance levels, consolidation is liable to be a dominant theme ahead of Tuesday's Federal Reserve interest rate decision, but with a slightly firmer bias.

The US currency was close to 1.3875 in Europe on Monday with further selling pressure close to 1.3850.

The headline US retail sales data was close to expectations with a 0.3% increase as auto sales rose strongly. The underlying figure was weaker than expected with a 0.4% monthly decline which will maintain fears over a slowdown in spending, although July's data was revised higher. There was a surprising 2.4% decline in gasoline sales while building material sales also fell.

The 0.2% increase in industrial production after a 0.5% increase previously continues to suggest modest manufacturing growth, while consumer confidence edged slightly higher. Former Fed Chairman Greenspan's warnings over the housing sector will help keep fears over US growth trends in focus and ensure weak underlying dollar sentiment continues. Speculation over a 0.50% Fed rate cut is liable to edge slightly lower.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

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