On the U.S. data front we did not get very reassuring numbers. To confirm market expectations in respect of Federal Reserve tightening this year, we need significantly stronger numbers.
The theme in the market remains interest rate differentials, it's not surprising to see the dollar come under some pressure.
The growing tension with Iran is likely to be dollar negative news.
The risk that rates will go beyond 4.50 percent is probably higher than currently priced into the market.
The U.S. economy is still doing very well, and numbers out this week should be fairly solid. The dollar is going to be well supported.
People are not yet factoring in a high probability of a military strike and that's rather surprising. We should be preparing for oil prices to spike quite a lot higher, even $100 a barrel is not out of the question, and that could have a big impact on currencies.
Clearly you can speculate that 4.75 percent is not the end of Federal Reserve tightening and there is a good argument now that they go to five percent. People don't want to be dollar short at the moment.
People would start to worry about growth, and given the fact that the market is already looking for the Fed to end its rate increases this could be a dollar negative. No one would expect central banks to be raising rates in an environment where energy costs are going up sharply.
They may keep a zero interest rate policy for quite a while. They don't seem in a rush to make the first move.
In the euro zone numbers have been better than expected. In respect to the second half of the year the market is too cautious on the ECB and future rate hikes.
