EUR/USD on Friday first held steady, taking a break ahead of important US data and the weekend's G7 meeting. The EUR/USD pair stood at the 1.19 area as US traders came into the market. The shock of the day came with the extraordinarily strong durables goods orders release, which always is a volatile number as displayed again last Friday with a 3.4% M/M rise. For EUR/USD, this immediately translated into dollar strength, with the pair falling to the low 1.18's in the aftermath. The pair also ended the day at that zone. Te market is evidently following the same reasoning as we see USD move from strength to strength, This is of course very visible against a euro, of which it is absolutely less certain that rate hikes will come in the same time frame as in the US…This could see the rate difference between the US and the EMU erode completely over the course of 2004. The only valid conclusion remains 'buy dollar on dips'.
ČSOB - Investment Research