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• The US dollar regained some ground against rival currencies on short-covering ahead of the release later today of the US

core Personal Consumption Expenditure deflator data for June, dealers said.

• The core PCE deflator is the Federal Reserve's preferred inflation measure, thereby providing an important gauge on

whether the Fed will lift interest rates again at its policy meeting next week.

• Despite its gains, the outlook for the dollar appears shaky after the much weaker-than-expected US GDP data for the

second quarter released last week.

• 'In addition to growing expectations for an end to the interest rate hike cycle in the US, there is emerging anxiety about the

possible risk of the US slipping into recession,' Commerzbank treasurer Ryohei Muramatsu said.

• 'As sentiment for the dollar is weakening, the dollar may be sold towards the mid-113 yen level in the near term,' he

added.

• The euro was also easier against the dollar on short-covering ahead of the PCE data but could recover soon with the

European Central Bank expected to raise key rates on Thursday, dealers said.

USA

Figures out Today:

13:00 US personal spending (Jun) %m/m Exp 0.4 Prev 0.4

15:00 US construction spending (Jun) %m/m Prev -0.4

15:00 US ISM manufacturing (Jul) Exp 53.8 Prev 53.8

15:00 US pending home sales (Jun) %m/m Prev 1.3

* US Treasury Secretary Paulson speaks on US and global

economies

* US domestic vehicle sales (Jul) m Exp 13.2 Prev 12.6

• The US ISM index is similarly expected by the market to post a modest decline in July but there are upside risks to this

number and a 2.4% outturn would serve to emphasise the clear acceleration in core inflation – which shows no sign of

dissipating – and would bolster the case for a 25bp rate hike on 8 August. For FX markets, a speech by US Treasury

Secretary Paulson on the US and global economy could be important in setting out the administration’s dollar policy.

Europe

Figures out Today:

08:55 GE PMI manufacturing survey (Jul) Exp 58.9 Prev 59.5

08:55 GE unemployment change (Jul) k Exp -30 Prev -49

08:55 GE unemployment rate (Jul) sa % Exp 10.9 Prev 10.9

09:00 EA PMI manufacturing survey (Jul) Exp 57.3 Prev 57.7

10:00 EA unemployment rate (Jun) % Exp 7.9 Prev 7.9

• UK and euro area PMI surveys for July (manufacturing today, services on Thursday) are the last major statistical releases

ahead of central bank interest rate decisions on Thursday.

Figures out Today:

07:00 Nationwide house prices (Jul) %m/m Exp 0.2 Prev 0.3

07:00 Nationwide house prices (Jul) %y/y Exp 5.0 Prev 5.0

09:30 PMI manufacturing survey (Jul) Exp 54.5 Prev 55.1

EURO US DOLLAR @ 1.2735 GB POUND US DOLLAR @ 1.8655 GB POUND EURO @ 1.4650 USDJPY @ 114.70

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