The conflicting market pressures on the dollar have been illustrated over the past week by the trade deficit and growth reports and these conflicts are likely to continue in the short term. The underlying US external position will remain precarious with a very high current account deficit and there will be further unease over the US budget deficit. Short-term yield differentials will continue to move in the dollar's favour, especially as the Fed may have to consider a more aggressive tightening. There is some probability of increased investment flows, especially if the administration pledges to tackle the budget ... (full story)