Tuesday 29th April

The US dollar has traded a shade to the weaker side as investors/traders become wary ahead of a Fed meeting and a raft of major economic data which could well decide the medium -term outlook for US rates.

Speculation is high that that the US central bank will trim its funds rates by 25 bp to 2.0 per cent and signal a desire to hold rates at this new level for the time being. Meanwhile EZ ministers continue to be concerned about inflation pressures and we see no chance of an easing there for sometime to come. Yesterday ECB president Trichet warned that risks to price stability remained on the upside despite regional data pointing to an inflation slowdown in 4 German states for the month of April.

So a Fed ease is expected tomorrow coupled with falling growth, consumption, manufacturing and payroll numbers during the week. Difficult to see the USD making further gains.