| 6/3/2008
02:00 pm: EUR/$..1.5461 $/JPY..104.97 GBP/$..1.9633
$/CHF..1.0398 AUD/$..0.9533 $/CAD..1.0074
Bernanke’s Warning
On Inflation Boosted Dollar
The dollar rallied across the board after Fed
Chairman Ben Bernanke unexpectedly warned of inflation
risk via satellite before International Monetary
Conference Central Banker’s Panel in Spain.
He said the central bank is “attentive to
the implications of changes in the value of dollar
for inflation and inflation expectations and will
continue to formulate policy to guard against
risks to both parts of our dual mandate”.
This is the first time Bernanke highlighted the
impact of dollar weakness on rising inflation,
indicating that the central bank is not going
to cut rates again. The dollar gained around 1%
to 105.54 versus the yen. The euro slipped almost
200 pips from 1.56 to as low as 1.5412 against
the dollar.
Interest rate futures on the Chicago Board of
Trade showed a nearly 70% chance that the Fed
will raise interest rates above 2.00% by the end
of this year.
A report released later pushed the greenback
even higher. US factory orders rose 1.1% in April,
beating the estimate of 0.1%. In the same month,
durable goods orders fell 0.6% as expected while
core durable goods orders rose 2.4%.
Earlier, the Bank of Australia announced to keep
rates unchanged at 7.25% as expected after its
monetary policy meeting. Euro zone data released
last night were mixed and provided little signal
for market direction. Producer Price Index rose
from 5.7% to 6.1% in April, but below the estimate
of 6.2%. First quarter GDP rose to 0.8%, higher
than the estimate of 0.7%.
In the coming session, traders will look into
Germany May services PMI (exp 53.7, prev 54.9),
euro zone May composite PMI (prev 51.9), euro
zone May services PMI (exp 50.6, prev 52.0), UK
May services PMI (prev 50.4), and euro zone April
retail sales (exp 0.3%, prev -0.4%).
Wednesday morning will see US May ADP employment
(exp -30k, prev 10k), US Q1 productivity (exp
2.5%, prev 2.2%), and US May non-manufacturing
ISM (exp 51.0, prev 52.0).
EURUSD will face interim resistance at 1.5470,
followed by 1.55 and 1.5530. Additional ceilings
will emerge at 1.5570, backed by 1.56. Support
starts at 1.5420, backed by 1.54, 1.5380 and 1.5350.
Subsequent floors are eyed at 1.5320.
USDJPY encounters interim resistance at 105.30,
backed by 105.50 and 105.80. Subsequent ceilings
will emerge at 106, followed by 106.30 and 106.50.
On the downside, support begins at 104.80 and
104.50, followed by 104.30. Additional floors
are eyed at 104, backed by 103.70 and 103.50.
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 1.9620,
followed by 1.96 and 1.9580. Additional floors
are eyed at 1.9550, backed by 1.95 and 1.9470.
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