The greenback kicks off trading mired near its lows as traders posture for several key US economic reports due out this week. Given the increased scrutiny over recent data for spillover effects from the subprime meltdown, traders will carefully analyze housing reports, Q2 GDP, PCE, and the University of Michigan consumer sentiment survey. US growth in the second quarter is seen rebounding sharply from a lackluster Q1, with the preliminary figure set to reveal robust 3.2% GDP versus a measly 0.7% from the previous quarter.
Sentiment over global interest rate differentials will continue to be a key driver in FX movements. In light of last week’s Congressional testimony from Fed Chairman Bernanke, the FOMC remains poised to leave policy unchanged with a bias against inflation. Nevertheless, with the BoE and ECB both set to maintain its tightening stance – we anticipate further losses in the dollar in the coming months as a result of yield disparities.
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