Treasury - Daily Forex for day 19.07.2006

Favourable U.S. data released on Tuesday provided support for the dollar, which rose to near three-month highs against the euro and the Swiss franc. Higher-than-expected June producer prices and May capital inflows lifted chances that the Federal Reserve might yet again raise interest rates when it meets in August. June PPI was up a strong 0.5%, though the core index, which strips out energy and food prices, rose a mild 0.2%, in line with forecasts. Net capital inflows into U.S. amounted to $69.6 billion in May, comfortably covering that month's trade deficit of $63.8 billion.

The crown firmed slightly versus the euro yesterday but remained in a range between 28.4 and 28.6 which it has held for about a month. The market showed no reaction to May retail sales data released this morning even though the result was well above expectations. The sales jumped 7.2% yoy, above market forecasts for a 5% increase.