User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Friday June 6, 2008 - 15:02:07 GMT
BHF-Bank -

Share This Story:
| | Email

Forex Blog -FX Briefing - ECB signals interest rate rise in July

FX Briefing 6 June 2008

·        Highlights

·        Bernanke warns of inflation risks, stresses importance of strong dollar

·        ECB staff revise inflation forecasts significantly upwards

·        ECB in a state of heightened alertness

·        Hawkish ECB strengthens euro, limits dollar’s upward potential

ECB signals interest rate rise in July
Up until Thursday afternoon, the main focus was on the dollar. EUR-USD firmed to below 1.54 temporarily. This was mainly due to remarks made by Fed chairman Ben Bernanke on the subject of exchange rates; he said that the weak dollar had contributed to the sharp increase in import and consumer prices, and that the Fed would be monitoring exchange rate developments very carefully.

Mr Bernanke’s remarks on the dollar are particularly striking because the Fed very rarely comments on the foreign exchange market – partly because the Treasury is responsible for currency policy, and partly because politics’ influence on foreign exchange markets is very limited and difficult to predict. Mr Bernanke’s remarks suggest that US policymakers have agreed that the dollar should not be allowed to depreciate further. The statement was presumably also coordinated internationally, as on 13 and 14 June, the G8 finance ministers are meeting in Osaka.

There are three main reasons as to why the US administration has deviated from its policy of benign neglect as regards dollar weakness: (1) The fact that the dollar is undervalued is boosting exports significantly; discounting the oil price effect, the foreign trade deficit has already declined markedly. (2) Crude oil price and dollar exchange rate are now closely correlated; presumably dollar depreciation is pushing up the prices of crude oil and other commodities. (3) The USA’s substantial financing needs, particularly the need for fresh capital for the banking system, cannot be met without foreign investment; but with low interest rates and a weak currency, there is little incentive for foreign investors to invest in the US.

There was a big surprise at the ECB press conference on Thursday: President Jean-Claude Trichet announced that the Governing Council was in a state of heightened alertness. In reply to journalists’ questions, he even said that a decision to raise interest rates could be taken in July: this was “possible, but not certain”. In the new ECB staff projections, the inflation forecasts were revised up substantially from 2.9 to 3.4% for 2008 and from 2.1 to 2.4% for 2009 (all figures middle of the range), which underlined the more hawkish position.

Possibly, when formulating its policy stance, the ECB Council had had a gradual tightening of monetary policy in mind in order to show its determination to act when necessary and maintain its credibility. Jean-Claude Trichet emphasized that the decision to raise interest rates was not yet certain and indicated that the interest rate step would only be a small one. Nevertheless, his remarks caused a strong market reaction: market participants are now pricing in almost three interest rate increases within the next six months. The yield on 2-year Bunds shot up by more than 30 points to 4.65% (briefly peaking at 4.78%), the interest rate spread between 2-year Bunds and 2- year T-notes widened nearly as much to about 210 basis points (peaking at 228 bp). At the same time, the euro strengthened by more than two cents to 1.56. The dollar’s gains after Ben Bernanke’s speech turned into a slight loss.

It remains to be seen whether a rate tightening cycle is really on the agenda. In our view, which is compatible with the ECB projection, inflation will peak in Q3 and go down to about 3% in Q4. From the second quarter on, economic growth is likely to slow down significantly. The ECB itself has again indicated that there is a downward risk to growth, and its staff is forecasting growth of 1.8% in 2008. This looks quite good at first glance, but, because of the overhang in Q1, would in fact mean little more than stagnation in the second to the fourth quarter (0.2% per quarter). The financial markets situation has not eased much either. The interbank market and asset backed securities markets are still not functioning normally, banks’ earnings are weak for the most part, and are likely to be additionally burdened by interest rate hikes; furthermore, capital constraints are hampering banks.

In our view, the macroeconomic situation still does not warrant raising interest rates. However, the ECB Governing Council has now apparently made up its mind to take this step. Once this decision has been taken, it will be difficult to reverse it; the hurdles for a subsequent interest rate cut get higher, and those for raising interest rates further lower. At the moment, it does not look as though anything could stop interest rates being raised in July as signalled.

In view of all this, it is likely to be difficult for the dollar to gain ground in the near future. Although the Fed, and possibly the G8 summit too, will probably support the US currency, the upward potential appears to be limited. In the next few weeks, there are likely to be numerous comments from ECB representatives underlining the ECB’s hawkish stance. Weaker economic data, such as the German industrial new orders and production output figures just released, are unlikely to have much of an impact.

Stephan Rieke +49 69 718-4114

Economics Department
+49 69 718-3642
[email protected]
Foreign Exchange Trading
[email protected]
Jörg Isselmann
+49 69 718-2695
Matthias Grabbe / Klaus Näfken
+49 69 718-2688


<i>This report has been prepared by BHF-BANK Aktiengesellschaft on behalf of itself and its affiliated companies (together "BHF-BANK Group") solely for the information of its clients. The information and opinions in this document are based on sources believed to be reliable and acting in good faith, but no representation or warranty, express or implied, is made by any member of the BHF-BANK Group as to their accuracy, completeness or correctness. Opinions and recommendations are given in good faith but without legal responsibility and are subject to change without notice. The information does not constitute advice or personal recommendation, for which the duty of suitability would be owed, but may facilitate your own investment decision. Moreover, you should seek your own advice as to the suitability of an investment matter mentioned herein. Investors are reminded that the price of securities and the income from them can go down as well as up and that the past performance of an investment or a market is not necessarily indicative for future results. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete, and this document is not, and should not be construed as, an offer to sell or solicitation of any offer to buy the securities mentioned in it. BHF-BANK Group and its officers and employees may have a long or short position or engage in transactions in any of the securities mentioned in this document, or in any related securities. This publication must not be distributed in the United States.

© 2007 BHF-BANK Aktiengesellschaft

All rights reserved. Please mention source when quoting from it.



Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."

Actionable trading levels delivered to YOUR charts in real-time.

Register To Test Your Amazing Trader

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Tue 17 July 2018
AA 08:30 GB- Employment
A 13:15 US- Industrial Production
AA 14:00 US-Powell Testimony
Wed 18 July 2018
AA 08:30 GB- CPI
A 12:30 US- Housing Starts/Permits
AA 14:00 US-Powell Testimony
Thu 19 July 2018
AA 1:30 AU- Employment
AA 08:30 GB- Retail Sales
A 14:30 US- EIA Crude
A 12:30 US- Weekly Jobless
Fri 20 Jun 2018
A 12:30 CA- CPI/Retail Sales

John M. Bland, MBA
co-founding Partner,

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube

Max McKegg's Daily Forex Trading Forecasts

Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.

Request a TRIAL of Max's Forex Service.


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.



By using this website, you are agreeing to our Privacy Policy and Terms of Use, and Cookie Policy

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105