EURUSD, GBPUSD. Dollar was under pressure after publication of inflationary index CPI and data on US industrial production. by OpenForex.com

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EURUSD, GBPUSD. Dollar was under pressure after publication of inflationary index CPI and data on US industrial production.

21:44 04/18/2007

Yesterday the dollar received negative impulse. Market being against the dollar, reacts vividly to negative fundamental data over the USA and ignores positive.

Yesterday in the beginning of American session traders began to drop the dollar having reacted to publication of inflationary index - CPI in the USA and also data on industrial production in the USA for March.
Basic background of inflation dipped in March. According to Department of Labor CPI grew to 0.6% vs. rise in February 0.4%.
However price index except for food and energy prices having great volatile seasonal compound, dropped by 0.1%, having shown value 0.1% in March vs. February indicator of 0.2% and January 0.3%. It is an indicator of steady downtrend of inflationary background in the country.
Most analytical agencies suppose that such steady tendency on downturn of inflation can give an occasion for FRS to reduce rates at the nearest FOMC meeting, which should take place in the beginning of May.
On the other hand European Banks -ECB and Bank of England are going to continue policy of rates rise.
For the first time for last 15 years the pound sterling rate rose to a price level of 2 dollars. Scaled growth of inflation in Great Britain, which overcome 2% annual limit, became a subject of trial in English parliament. CPI in March in Great Britain rose to 3.1% in annual expression. It means that Bank of England will have to raise the rates at the nearest meeting so that inflation is not over the control and to prevent overheating of economy. Last six months in Great Britain there is observed hike in sphere of financial services, in a sector of real estate and consumption. Analysts forecast GDP gain up to 2.9% in 2007.
Decrease in Interest Rate Differential - difference between FRS and ECB rates, increase between FRS and BOE rates lead to rise of curve of yield concerning state securities of European countries, that in its turn leads to rise in rates of their national currencies vs. the dollar.
The dollar tested pressure after publication of FRS report about industrial production in the USA for March, 2007, which showed drop in activity of industrial sector of economy.
Industrial production in the USA in March decreased on a background of production volume in sector of public utilities due to warmer than usual weather in the USA. Production of durable goods in March increased. Industrial production in the USA for March was down 0.2% FRS informed.
In February the volume of industrial production grew by 0.8% instead of 0.1% as it was informed earlier. Capacity utilization in March was down to 81.4%. February indicator was revised to 81.6% from 82.0%. Capacity utilization in March remained above average level for a period since 1972 to 2005, which makes 81.0. In comparison with similar period of last year industrial production in March was up 2.3%, capacity utilization was up 2.3%.
As a whole market keeps being "charged" against the dollar. However crucial price level 1,2670 has approached to current price indicator, only 100 points separate them. From this level there is possible strong correction. Technical uptrend on euro shows all signs of the end of tendency - 5 wave as a rule is the weakest in a trend. Therefore while be off the market.