Ben Bernanke's comments yesterday are still containing the market sentiment. the fed chairman has said that the policy is well positioned which hinted that there can be no further cuts and he has added that economic conditions are to get better in the second half and to pick up in 2009 but the growth risks are still to the downside but he is worried about the high inflation rates amid the current high energy and commodities prices and the weak dollar levels which were negatively impacted by the cutting interest rate which lowered its yields making it less attractive.. The comments were optimistic enough to push the greenback higher. His saying that the policy seems well positioned could change the current priced interest rate outlook which was not taking off further cuts to come soon.
May ADP could underpin the greenback from another side by the release of the non-farm payroll of April. May ADP was expected to be -30k and it has come positively by 40k surprising the market. Also the US Non-manufacturing index came higher than the expectation of 51 at 51.7.
We wait tomorrow for the BOE rate decision which can surprise the market by a .25% cut after the recent weak data of the housing market. We have had this week the release of mortgage approvals which reached to 58.000 in April from 63.000 in March which is nearly the half of last year number of April which was 113.000. Also we have had today a contracting service number of May from UK at 49.8.
Also, we wait tomorrow for the ECB rate decision and its press conference after it which is expected to show the ECB concerns about inflation which can support the single currency.
Best wishes
FX Consultant
Walid Salah El Din
E-Mail: mail@fx-recommends.com
