The dollar firmed after higher than expected US inflation raised concerns that the Feds will curb rates easing amid boosting slowing economic growth. Yet the problem gets bigger as high inflation could take away the Feds flexibility in cutting down rates just at the time it needs to respond more aggressively to help out the sluggish economy.
The Euro dropped yesterday against the dollar amid the release of the housing starts and consumer prices index in which the reports showed that prices rose slightly ahead of expectations. However, the euro bounced back amid the FOMC minutes which showed that the Feds are likely to cut in rates in which the pair was also influenced moving to the upside to fetch a high of 1.4747 and a low of 1.4705
Meanwhile, the pound was hit slightly aggressively by the stronger dollar as traders witnessed yesterday's BOE minutes to mean further cuts in interest rates were likely. The British pound has been on the resistance all week with the recent ill mortgage lender Northern Rock adding to the uncertainty at a time when the overall economy is predicted to slow rapidly. As for today, the pound is gradually inclining against the dollar pulling the pair with it to record a high of 1.9473 and a low of 1.9410. Yet we should all put in mind that the Bank of England remains on course for cutting in rates as the risk of weaker growth remains intact.
The dollar rallied against the Yen as traders awaited the release of the US manufacturing data for further clues about the outlook of the economy, as for today the dollar slightly dropped as investors cashed in profits which pushed the pair to fluctuated within narrow ranged recording at this hour a high of 108.27 and a low of 107.95
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