Wednesday 16th April

The USD rallied towards the close yesterday as a surprisingly strong set of manufacturing and inflation data suggested the Fed may not continue to cut US interest rates as aggressively as it has done over the last few months. Also a Treasury report showed foreigners increased purchases of US assets in February thus easing concerns that the credit crisis would dry up US capital inflows.

But the market will continue to be wary of buying US dollars as fears of a sharper US economic slowdown and more banking sector losses keep global investors wary of holding long dollar positions.

Overnight the US dollar has slipped a little against the Yen as caution ahead of earnings announcements by major US banks takes hold. Focus today will be on those earnings and the US consumer price index for March as well as housing starts and industrial output. Be careful out there!