Wednesday March 22, 2006 - 08:40:41 GMT
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Tricom Futures and Foreign Exchange -
Forex: The USD remains in control
The dollar held sharp gains on Wednesday as traders felt more confident the Federal Reserve would keep pushing overnight interest rates beyond the expected increase at next week's policy meeting.
An upbeat view of the economy from Fed Chairman Ben Bernanke on Tuesday and data showing surprisingly a big jump in core producer prices (PPI) in February revived expectations for the central bank to raise rates to 5 percent by May and possibly higher after that.
Overall the top three major currencies remain locked in an undecisive tug-of-war as the Fed is seen raising rates a bit more, while the European Central Bank is also lifting rates and the Bank of Japan is expected to do so before year-end.
But with the Fed closer to the end of its long campaign after 14 consecutive increases since June 2004 to 4.5 percent, the dollar has been very sensitive to changing sentiment on how high U.S. short-term rates will climb.
The highlight on the economic calendar today is the BOE Minutes from the previous month's meeting. Looking for a continued sentiment towards rates staying on hold, with a bias towards hiking later in the year.
The EUR and GBP are just hanging in there, with a break of 1.2070 and 1.7450 respectively, opening up the way for a leg down in both.
Today's Economic Release:
UK: BOE Minutes
Today's Top Trades
- Sell EUR/USD on a break below 1.2070
- Buy USD/CHF on a break above 1.3045
For more ideas send me an email, [email protected]
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