The dollar has come under renewed pressure due to fresh falls in US equities and concerns about possible military conflict between the US and Iraq. The euro has moved back above the $0.98 level, having traded about half a cent lower yesterday. US equity markets posted relatively modest losses yesterday with the Dow down 1.32% and the Nasdaq off 1.29%. However, the currency market lacks any real direction at this point.
The dollar was helped yesterday by the news that the US international trade deficit in goods and services narrowed to $37.16 billion in June from a revised $37.85 billion in May. The market was relieved that the figure had come in below expectations (see feature box). This will be a very quiet day on the statistics front so that currencies will take their cue from equity markets.
Euro area industrial production data yesterday showed that there was a monthly rise of 0.5% in June over May. This constituted a fall of 1.2% in year-on-year terms. The figures were in line with expectations. The rise in June of 0.5% followed no change in May and a fall of 0.7% in April. Sterling continued to trade in a narrow range against the euro and US dollar as UK data on the public finances and on money supply and lending failed to attract much interest. However, the market will be more interested in the release tomorrow of UK retail sales for July and the CBI monthly trends survey. Sales are expected to have picked up in July after June's fall of 0.7%. It was felt that the June figures were distorted by the World Cup and Jubilee celebrations. Anything short of a strong recovery would fuel speculation about a cut in official interest rates by the Bank of England when it meets again in September.//www.fxcentre.com