Market Recap, And What Market is Waiting for?

The dollar was marginally higher after weakening in Asian trade, but continued to trade within tight ranges as the market awaited US data this afternoon for further direction.

The dollar had dipped overnight following strong rallies on Asian stock markets and a report by China's National Bureau of Statistics calling for the pace of diversification of its foreign exchange reserves to be speeded up in order to hedge against dollar losses.

Once US interest rates peak, the issue of financial imbalances is likely to come back to the fore.

For today, however, we focus on US consumer confidence and existing home sales data this afternoon. Market players are expecting a weak reading for both data, which should provide further clues on the extent of the slowdown in the US and its implications for US interest rates.

Meanwhile, however, European data are also showing signs of easing, with tomorrow's key Ifo survey of German business confidence expected to fall from its recent 15-year highs.

Yesterday's Belgian business confidence indicator -- often seen as a good pointer to the Ifo index -- fell below expectations, while today Italian business confidence also came in weak though French confidence strengthened.

Weaker confidence data, however, is unlikely to be sufficient to prevent the European Central Bank from raising interest rates on Aug 3, particularly as money supply and credit growth data on Friday are of greater importance to the ECB,