The euro jumped above the key $1.20 resistance level versus the dollar after weaker-than-expected U.S. manufacturing activity and minutes from the Federal Reserve's December policy meeting indicated that the Fed is close to completing its interest rate tightening cycle. The U.S. Institute for Supply Management's index of factory activity fell to 54.2 in December from 58.1 in November, even below the market expectations of a drop to 57.5. The news on record U.S. construction spending in November did little to prop up the dollar as the month's 0.2% rise was still lower than market forecasts of a 0.6% advance.
The Czech unit closed Tuesday's trading flat at 29.06 against the euro, after firming briefly to the stronger side of the 29.00 mark. The crown took little notice of a finance ministry report that public budget deficit may have narrowed to 2.8% of GDP last year from 3.0% in 2004. On Thursday, the CSU will publish data on foreign trade balance for November. We expect a surplus of 4.0 billion crowns.