The market will be watching the consumer prices report, as the minutes have made it clear the Fed is watching inflation. The economic data has been strong and supportive for the dollar.
The minutes were quite dovish in the sense that the Fed seems very close to the end of its tightening cycle, so I think the market move is justified.
Monetary policy expectations were the driving forces on the FX markets in most of 2005 and while we expect structural problems to come back to haunt the dollar in 2006 we expect monetary policy expectations to lend support to the greenback early in the year.
Monetary policy expectations were the driving forces on the FX (foreign exchange) markets in most of 2005 and while we expect structural problems to come back to haunt the dollar in 2006 we expect monetary policy expectations to lend support to the greenback early in the year.
Japanese officials make statements like that when we see very rapid movements in the foreign exchange markets because they are concerned such moves can build into stronger trends.
Even though there was a reasonable GDP figure the market was unwilling to give the yen good support. There's a consensus building that the BOJ isn't going to move quickly and that means the good news for the economy isn't enough to boost the yen further.
People already have a more positive view of the European economy, so they are not that fussed. The market is a bit tired after all the dollar selling this week.
Risk aversion is rising in the market and investors are nervous about what will happen when U.S. equities open.
The current rate expectations are still supportive for the dollar. But now the market needs to be assured by upcoming economic data.
The bottom line is that the door is more open for a rate hike and the market is convinced we will have another rate hike.