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Daily FX Report

Trichet said inflation remains his top concern

Fri, May 9 2008, 08:23 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG

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Markets review

The EUR rebounded on Thursday from a two-month low against the USD after European Central Bank President Jean-Claude Trichet said inflation remains his top concern. After the ECB left the benchmark refinancing rate at 4%, Trichet told reporters that high energy and food costs mean that the euro zone still faces a protracted period of high inflation. His comments pushed the EUR/USD to a high at 1,5440.

The GBP/USD was steady at 1,9530 after the Bank of England left interest rates on hold at 5%. Economic data in Britain has reflected a weakening economy, with housing prices sliding rapidly and analysts said they expect the BoE to cut rates when it meets again in June.

Japan March leading economic indicator index falls to 20 from Feb’s 54,5. A reading above 50 suggests an economic expansion in the month ahead, while a reading below 50 suggests a contraction. In spite of this data the JPY rose 0,7% against the USD. Some market rumors say that a big Japanese bank sold foreign bonds to buy Japanese government bonds (JGBs). This talk helped to push the USD/JPY lower.

Technical analysis

EUR/USD

After the ECB let the interest rate unchanged the market rose up and quotes over the level at 1,5400. This mark seems to be a key level because it developed to a strong support level after the currency crossed it the first time at the beginning of March. The comeback over the level could expect a short recovery phase.

GBP/USD

Also the BoE does not change its interest rates. The first time since end of March the currency pair broke through the strong support at 1,9600. Because the GBP quotes under this level and the past down trend could be a further ongoing down trend.

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Published on  Fri, May 9 2008, 08:45 GMT

Archive

• Trichet said inflation remains his top concern
  Published On Fri, May 9 2008, 08:23 GMT
• NZD/USD hit hard
  Published On Thu, May 8 2008, 09:21 GMT
• The British consumer morale falls in April to its lowest since records began four years ago
  Published On Wed, May 7 2008, 13:23 GMT
• The USD fell on Monday for the first time in three sessions
  Published On Tue, May 6 2008, 08:00 GMT
• Focus on Europe with ECB and BoE policy meetings
  Published On Mon, May 5 2008, 09:08 GMT

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