Sunday, March 19, 2006

USD Mired in Soft Tone by Korman Tam

At 5:00 AM Eurozone January Industrial Production (exp 0.4%, prev 0.1%) At 9:15 AM US February Industrial Production (exp 0.7%, prev -0.2%) US February Capacity Utilization (exp 81.3, prev 80.9) At 9:45 AM US March University of Michigan Consumer Sentiment final (exp 88.0, prev 86.7)

The dollar continued to trade on a softer tone versus the majors in the early Friday session, revisiting its lows from yesterday against the euro. The selling in the dollar on Thursday was prompted by tame US inflation data, which is expected to further ease pressure for additional Fed rate hikes. The focus will continue to remain on US economic data, with recent foreign exchange moves predominantly driven by interest rate expectations. FOMC board members have highlighted the uncertainty that lies ahead for Fed rate policy and will be highly dependent on upcoming economic reports.
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In the session ahead, US data will include February industrial production, capacity utilization and the final reading of the March University of Michigan consumer sentiment survey. Industrial production is forecasted to improve to 0.7%, reversing January’s 0.2% decline. February capacity utilization is seen rising to 81.3, up from 80.9 a month earlier. Lastly, the final reading of the March University of Michigan consumer sentiment survey is expected to edge up to 88.0, compared with 86.7 in the previous report.

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