Euro enjoyed a large rally against the USD Tuesday. Hawkish comments and concern over inflation helped push the EUR higher. USD saw weakness across the board. Record oil prices again this morning as oil prices break $130.
Canadian CPI showed inflation accelerated last month, suggesting the central bank may be less likely to cut borrowing costs at its June meeting and pushing the CAD higher, along with record oil.
The GBP rallied against the USD on expectations of continued hawkish policy from the BOE and overall weakness in the USD.
The New Zealand Dollar saw continued strength along with the CAD and AUD, in part derived from the continued stregth in commodities.
The Japanese Yen - the BOJ left rates unchanged at 0.5%. Expecting Resistance at 105.30.
Wednesday’s trading session ushered in record oil prices, a gloomy fed forecast and a selloff in stocks, the Dow losing 227 points. Today we have Initial Claims at 8:30 EST.
Policymakers expect weak economic growth and increased unemployment in the remainder of 2008. However the specter of increased inflation will probably prevent further interest rate cuts. While lower interest rates encourage economic growth they do so at the risk of creating excessive inflation.
[B]EUR/USD[/B]
The dollar saw it’s largest two day decline against the euro since March and it may face further punishment with the release of the Existing Home Sales number. The Euro was strenthed by rise in German business confidence (unexpected increase for May) and followed on the heels of Monday’s hawkish comments. Let’s take a look at the technicals:
[B]GBP/USD[/B]
The GBP is maintaining it’s recent strength as a result of inflationary fears and weakness in the USD - related to rising oil and negative fundamental data. We saw an important trendline break and are currently approaching resistance at 1.9879.
[B]USD/CAD[/B]
The Canadian Dollar has been benefiting from the release of strong fundamental data and the record oil prices - with fresh highs this morning (135$). Let’s take a look at the technicals:
