The dollar strengthened to challenge the 1.1850 level against the Euro ahead of the New York opening on Thursday before retreating back towards 1.1865 as… … trading ranges narrowed significantly.

The dollar was struggling to overcome the weight of positive interest rate
expectations built into current prices.

The US housing data was
significantly stronger than expected with starts rising to an annual rate of
2.28mn in January from an upwardly revised 1.98mn in December. The sector
secured an important boost from warm and dry weather during the month which
artificially pushed the headline figure stronger, although there was also a
healthy rise in permits which suggests that there is still residual strength in
the sector.

Elsewhere, jobless claims rose to
297,000 in the latest week from 278,000 the previously, although this is still
an historically strong figure, while the Philadelphia Fed manufacturing index
rose to 15.4 in February from 8.8 the previous month. Fed Chairman Bernanke did
not deviate significantly from his testimony the previous day and expectations
of rising US interest rates will remain intact. Near-term inflation data will
remain important with the producer price data on Friday.

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