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Dollar Tumbled after S&P Financial Downgrade

Tue, Jun 3 2008, 01:13 GMT
by Yan Xu

Forexnews.com

6/2/2008 04:00 pm: EUR/$..1.5531 $/JPY..104.55 GBP/$..1.9659 $/CHF..1.0370 AUD/$..0.9539 $/CAD..1.0012

Dollar Tumbled after S&P Financial Downgrade

The dollar tumbled after rating agency Standard & Poor’s downgraded various US financial sector firms. The euro hit session high at 1.5588 versus the dollar following the news.

US data released earlier in the session were slightly above the expectations, but had little impact on the market. Manufacturing ISM rose from 48.6 to 49.6 in May, versus the estimate of 49.0. Construction spending slipped 0.4% in April after a 1.1% contraction in the previous month.

Te sterling lost more than 2 cents against the dollar after a UK mortgage lender announcement raised concern on financial sector problems. Britain’s biggest lender of buy-to-let mortgages, Bradford & Bingley, revealed rising bad debts and lower lending had reduced its profit in four months to April by half. Also, an official report showed UK new home loan approvals hit a record low in April.

The BoE and ECB will announce interest rates decisions early Thursday morning. The BoE is expected to hold rates at 5.0%. The ECB is also seen to leave rates at 4.0% unchanged. ECB Chairman Trichet will address economic growth and inflation outlook in the subsequent press conference.

The Bank of Australia is seen to keep rates unchanged at 7.25% on its monetary policy meeting tonight. Tomorrow will see euro zone April PPI (exp 0.8%, prev 0.7%), euro zone Q1 GDP (exp 0.7%, prev 0.4%), US April durable goods orders (exp -0.5%, prev -0.5%), and US April factory orders (exp 0.1%, prev 1.3%).

EURUSD will face interim resistance at 1.5550, followed by 1.5580 and 1.56. Additional ceilings will emerge at 1.5630, backed by 1.5650. Support starts at 1.55, backed by 1.5480, 1.5450 and 1.5420. Subsequent floors are eyed at 1.54.

USDJPY encounters interim resistance at 104.80, backed by 105 and 105.30. Subsequent ceilings will emerge at 105.50, followed by 105.80 and 106. On the downside, support begins at 104.20 and 104, followed by 103.70. Additional floors are eyed at 103.50, backed by 103.20 and 103.

GBPUSD encounters interim resistance at 1.9680, backed by 1.97 and 1.9730. Subsequent ceilings will emerge at 1.9750, followed by 1.9780 and 1.98. On the downside, support begins at 1.9630, followed by 1.96 and 1.9580. Additional floors are eyed at 1.9550, backed by 1.95 and 1.9470.

Published on  Tue, Jun 3 2008, 01:14 GMT