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Wednesday, July 19, 2006

EUR/USD: Close-Up View

The morning began with news that the core CPI for June rose 0.3%, which is higher than expected and consistent with the view that inflation growth has not yet tapered-off. There is, however, reason for Ben Bernanke to be a bit cautious in today's Senate testimony, because both housing starts and building permits were reported down. As always, the balancing act for the Fed is to contain inflation without extinguishing growth by "going too far." With housing such a major sector within the U.S. economy, the prospect of slowing housing starts leads some to believe that the economy may be cooling enough on its own, if given the chance. The risk that it will not is surely too great for the Fed at this stage. Read More....