The euro gained against the dollar in early deals today following yesterday's cautious speech by Fed chairman Alan Greenspan. By 0940, the single currency stood at USD1.0756, while against sterling it was up at STG0.6638. Greenspan warned that a war against Iraq posed "formidable barriers" to business spending and made it tough to gauge the US economy's health. However, he said that if economic growth did not revive, "various initiatives" were open to the Fed to try and stimulate an improvement. According to Niall Dunne of Ulster Bank Financial Markets, Greenspan may well have to use these initiatives to stimulate growth as a costly war with Iraq looms.
"Add to this Greenspan's questioning of the logic behind the recent Bush fiscal stimulus package, it is easy to understand why the recent USD rally, which saw it test resistance at USD1.0670 yesterday, has petered out," he said. "This increased uncertainty should again leave safe havens back in vogue so watch the price of oil and gold," he added. //www.fxcentre.com