The euro remained weaker against the dollar this morning as the market digested last night's comments from Alan Greenspan and the unexpected announcement from Iraq. The dollar rallied last night following Saddam Hussein's announcement on weapons inspections, which led the market to ignore Greenspan's comments that the US was in a "soft patch".
"Such quick compliance was not expected, and US equities and the dollar rallied on the news," said Niall Dunne. The dollar would have gained further but for Greenspan's downbeat testimony on the state of the US economy. However, there is speculation that the Iraqi parliament's rejection of the UN resolution earlier in the week was a ploy to let Saddam emerge in a pro-Western light and that the affair is largely a stalling tactic by Baghdad. "I can't personally see this compliance lasting, and I certainly wouldn't rule out military action early next year," Dunne said.
This morning's monthly bulletin from the ECB has been largely ignored as it reiterates comments made by Wim Duisenberg at the bank's press conference last Thursday. //www.fxcentre.com