Tuesday April 20, 2010 - 20:22:20 GMT
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U.S. Dollar Mixed at Mid-Session; Bank of Canada Signals Rate Hike
The U.S. Dollar is trading mixed at the mid-session, posting
gains versus the Euro, Swiss, and Japanese Yen while struggling against the
British Pound, Canadian Dollar and Australian Dollar.
The EUR USD remains under pressure on concerns the recently
approved European Union rescue package will not be enough to stem the financial
slide in Greece.
Borrowing costs continue to plague Greece with the cost of debt eating
up much of its cash flow. The spread between Greek Bonds and German Bunds
remains wide indicating that investors believe an investment in Greece is a
high risk proposition.
The British Pound surged to the upside this morning
following the release of better than expected Consumer Price data. Todayâ€™s
figure sends a signal that the Bank of England is likely going to pass on an
increase in its quantitative easing program at its next meeting in May. The
increase in inflation came as a surprise to the central bank as well as market
participants because the BoE has been warning about the possibility of
deflation. Gains are most likely being limited today by election concerns. Many
traders feel this market is not likely to trend until after the May 6th
election. Furthermore, traders are still worried the election will result in a
hung parliament which will make it difficult to pass legislation to curb the
Stronger demand for higher risk assets is helping to drive
the USD JPY higher. Signs that the global economic recovery is back on track is
leading investors to take on more risky assets like gold, crude oil and
The Bank of Canada voted this morning to leave interest
rates at 0.25% but strongly hinted that interest rates would increase sooner
than expected because of the strong economic growth and the fear of inflation.
For over a year, the BoC has indicated that rates would remain low until at
least July 1. Todayâ€™s policy statement indicates that June 1 is likely the date
rates will begin to rise.
The weaker Euro is leading to a stronger USD CHF. Traders
are anticipating more intervention by the Swiss National Bank in an effort to
protect the currency and the Swiss export market.
The AUD USD is up sharply on renewed talk of another
interest rate hike by the Reserve Bank of Australia in May. The RBAâ€™s minutes released early this morning
indicated that policymakers are concerned about inflation because of increasing
demand for Australian exports.
The NZD USD is struggling at the mid-session after an early
rally. The initial move to the upside today was triggered by the strong Aussie
Dollar. Traders are currently assessing the odds of an interest rate hike by
the Reserve Bank of New
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