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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Chispas who wrote (27270)	4/11/2005 1:24:12 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Forex - Dollar stays soft ahead of big week for US data Monday, April 11, 2005 3:54:38 PM afxpress.com LONDON (AFX) - The dollar was slightly lower against major currencies in a quiet start to the week, ahead of some key US numbers starting Tuesday Some sections of the market believe the US trade data for February, due tomorrow, will show a wider deficit than the 59 bln usd expected, pressuring the dollar lower. Clyde Wardle at HSBC Bank USA for one warned that the US trade gap may widen beyond 60 bln usd given the strength of the US domestic demand. The prospects of dollar falls will be even greater if a widening of the deficit is accompanied by a downbeat report on portfolio flows into the US in data due on Friday The data will reveal if there was enough foreign flows into US assets to span the country's trade gap. There is speculation that some hedge funds moved away from US Treasuries in Feb, shortening the odds of soft overall inflow numbers during the month. "Neither report is expected to bring good news, with the trade deficit forecast to deteriorate back to 59 bln from 58.3 bln in January, and the TIC flow report unlikely to show capital flows on a scale comparable to January's surge," said Daniel Katzive at UBS That aside, the minutes of the US Fed meeting on March 22 when interest rates were raised by a quarter point, due for release Tuesday, will also be of importance. Any hint that the Fed may yet increase the pace of its rate hikes will bolster the dollar These factors suggest that the coming week could be a volatile one for the dollar, said Neil Mellor at Bank of New York. The pound, meanwhile, found a small lift from stronger than expected UK numbers On the inflation front, the impact of surging oil prices saw producer prices rise above market expectations during March. At the same time it was revealed that the UK's trade position improved slightly in February as imports from countries outside the European Union dropped. The numbers should provide "a bit of solace" for the hawks at the Bank of England, but it is "questionable" whether the central bank will lift rates based just on energy-induced inflation, said Daragh Maher at CALYON. Also out today, government figures for February showed that house prices rose 10.5 pct year-on-year from 10.0 pct in Jan. But despite the rise analysts believe the housing market is stabilising. "The extent of the slowdown in underlying activity -- as reflected by the low number of new mortgage approvals and completions -- means today's ODPM data are unlikely to be signalling an imminent upturn in the residential property market," said Ross Walker at RBoS. Out tonight, the British Retail Consortium's performance of the retail sector over the Easter period will also be important as the sector has been weak of late. A jump in the March data may well strengthen the case for a rate hike further out. That aside, attention this week will be firmly on the UK labour market report on Wednesday where special focus will be on wage growth. If wages show a pick up from levels seen as sustainable so far, the odds shorten for an interest rate hike, thereby pushing the pound higher forexstreet.com