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Daily FX Report

The market is expecting the Fed to raise its interest rates more than once this year

Thu, Jun 26 2008, 08:34 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG

Good morning from Hamburg, and welcome to the Varengold Daily FX Report. The Fed’s 2-day meeting ended last night and they made some statements on its future monetary policy. Yesterday, the night turned into a great celebration after the German National team won against Turkey in the European Football Championship tournament.

Market review

The American Central Bank commented on the current economic situation in the US. In the context of inflation, the market is expecting the Fed to raise its interest rates more than once this year. The first rate hike is expected in July. An increase in interest rates is also expected from the ECB after its chairman Trichet gave a speech yesterday morning. Doubts of the Fed’s ability to enact aggressive monetary policy caused the USD to depreciate against other major currencies.

The EUR/USD rose to two-week high on Wednesday and reached 1.5684. This morning, the currency pair has changed a little and is currently being traded at 1.5650. The GBP/USD was up 0.2% at 1.9755, and the USD/CHF dropped 0.6% to 1.0351.

The Japanese economy has been suffering from the global inflation lately. The Bank of Japan did not say how it would adjust its monetary policy in the short term. A change in its policy is expected when the situation regarding inflation becomes clearer, and the economic situation improves. The JPY is down against major currencies. The EUR/JPY went up to a record high of 169.45. The CHF/JPY hit a 17-year peak of 104.29. The USD/JPY edged up 0.1% to 107.99.

EUR/CHF

Since the middle of May, the EUR/CHF has been trading in a downward trend channel, and rebounded at the support level at 1.6022. This development gave the currency a push, and it crossed the upper line of the channel. The pair is now trading on a short term upward trend line. A break through the resistance at 1.6250 will confirm the long trend.

GBP/JPY

The GBP/JPY has been trading in a positive trend channel. The blue trend line cut the channel in two sectors and it seems to be the indicator for the pair, if it trades close to the upper or down trend line. The whole channel seems to be tapering off, which could be a sign for the next trend impulse in the next trading days.

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Published on  Thu, Jun 26 2008, 09:00 GMT

Archive

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• The ECB and BoE are widely to leave interest rates at 4.25 % and 5.00 %
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