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The euro rallies across the board after ECB signaled a possible rate hike in March
Fri, Feb 9 2007, 01:18 GMT
by Yan Xu
2/8/2007 03:00 pm: EUR/$..1.3038 $/JPY..121.00 GBP/$..1.9578 $/CHF..1.2458 AUD/$..0.7812 $/CAD..1.1823
Euro Rallies on Rate Hike Expectations
The euro rallies across the board after ECB signaled a possible rate hike in March. The euro strengthened to 1.3040 versus the dollar, and rose to 0.6660 against the sterling.
The European Central Bank left interest rates unchanged at 3.5% as expected after its policy meeting this morning. ECB Chairman Trichet said the central bank will act in firm and timely manner to maintain price stability and the monetary policy remains accommodative. Most importantly, this time he called for "strong vigilance" in monitoring inflation. Recall that the lack of the use of "vigilance" after ECB meeting in January sent the euro down. As we said yesterday, the return of this key word made Trichet's comments today perceived as hawkish, increasing expectations for an ECB rate increase in March. The euro strengthened after Trichet's statement.
Meanwhile, the Bank of England also announced to keep its interest rates at 5.25% this morning. The sterling weakened as expectations for another rate hike in March were cut following a surprises rate increase in January. The sterling fell around 100 pips versus the dollar after BOE rate decision today.
GBPUSD encounters interim resistance at 1.96, backed by 1.9630, and 1.9650. Subsequent ceilings will emerge at 1.97, followed by 1.9730 and 1.9760. On the downside, support begins at 1.9550, followed by 1.9520 and 1.95. Additional floors are eyed at 1.9480, backed by 1.9450 and 1.94.
EURUSD will face interim resistance at 1.3040, followed by 1.3070 and 1.31. Additional ceilings will emerge at 1.3130, backed by 1.3150. Support starts at 1.30, backed by 1.2980, 1.2950 and 1.2930. Subsequent floors are eyed at 1.29.
Yen Soft, Eyes on G7
The yen weakened further today as speculation that G7 may agree to call for a stronger Japanese yen dissipates. Comments from Japan and US officials all indicate that foreign exchange will be one of the topics but not a main focus at the weekend G7 meeting. The market is now nervous waiting for the G7 meeting to be held in Germany on Friday. The yen weakened from 120.60 to above 121 against the dollar on Thursday.USDJPY encounters interim resistance at 121.30, backed by 121.50 and 121.80. Subsequent ceilings will emerge at 122, followed by 122.20. On the downside, support begins at 121 and 120.60, followed by 120.30. Additional floors are eyed at 120, backed by and 119.70.
Published on Fri, Feb 9 2007, 01:19 GMT
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