14 February 2002, 12:58 Forex - Dollar steady in early London trade ahead of US data
LONDON (AFX) - The dollar was steady in early London trade, but
well underpinned by healthy performance on US stock markets and growing
confidence in the outlook for a US recovery, dealers said.
They noted that the Fed Funds futures was pricing in a 100 pct
probability of a 25 basis points rate hike at the June 26 Federal Open
Market Committee, which highlights the overall growth optimism about
the country's economic recovery.
Steve Pearson, head of strategy at Halifax Group Treasury, said
attention will be focused on the weekly US jobless claims and business
inventories, at 1.30 pm today.
Participants are looking for further signs of stabilisation in the
US labour market, with a fall below the 400.000 mark set to boost the
dollar, he said
"We are going to be looking at the inventories numbers, to see how
far the de-stocking process continued in December, with of course the
implication for Q4 GDP," added Pearson.
Meanwhile, the euro was little changed against major currencies
following the release of weak German indicators and the European
Central Bank monthly bulletin.
Today's German retail sales figures for December, the weakest on
record since September 1999, continue to paint a bleak picture for the
euro zone's economic recovery. This in turn, contrasts with yesterday's
US shock jump in US retail sales, analysts added.
German retail sales figures, which are usually very erratic showed
a seasonally adjusted fall of 3.4 pct, for an annual drop of 4.1 pct.
Adrian Schmidt, economist at the Royal Bank of Scotland said the
impression of relative weakness in Europe was likely to maintain
downward pressure on the euro/dollar pair.
The ECB said in its bulletin that the outlook for price stability
has not changed significantly in recent weeks, and interest rates
therefore remain appropriate.
Sterling was mixed amid a lack of domestic leads to trade on.
Meanwhile, the yen was relatively stable against the dollar, with
observers citing bond maturities, coupon payments in foreign bonds and
risk of repatriation as the props to the unit.
But prospects for a weaker yen continue to depend of evidence of
weakness in the Japanese banking system and economy.
Analysts still see the short-term risks in dollar/yen to the
downside.
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