Dollar-Where To GO??

Mid-Day Forex Technical Report - Dollar Still in Range Despite Tamer Core Inflation

Mon, 30 Apr 2007 14:23:30 GMT
by Team

Forex Mid-Day Technical Report

Dollar Still in Range Despite Tamer Core Inflation

Dollar remains stuck in range against majors despite weaker than expected personal spending and tamer core inflation in Mar. Today's Mar personal income and spending data shows that inflation continues to moderate with core PCE deflator flat mom, dragging down the yoy rate from 2.4% to 2.1%, which is now much closer to Fed's comfort zone of 1-2%. Though, top line inflations high with PCE accelerating to 2.4% yoy. After all, the inflation part of the report is inline with the CPI report earlier which showed further moderation in inflation and should ease some of the concerns of Fed's members. Meanwhile, the unexpected slowing of personal spending to 0.3% casts some doubts on the underlying strength of US consumer. Other data saw Chicago PMI falling more than expected from 61.7 to 52.9 while construction spending rose 0.2%, inline with consensus.

Canadian dollar remains strong and surges against the greenback after the release of Feb GDP data which showed the growth of Canadian economy accelerated from 0.1% to 0.4% mom, much better than expectation of 0.2%. This is the fifth straight month of growth. USDCAD fell to as low as 1.1091 so far and is now close to 800 pips off this year's high at 1.1874 and is heading towards 06 low of 1.0930.

Released earlier, Eurozone M3 money supply growth continues to defy expectation and accelerated further to 10.9% in Mar, fastest pace in 24 years. Persistently strong upward momentum in M3 growth strengthen the case for further tightening by ECB down the road beyond the widely expected hike in June.

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