Sterling and Swedish crown climb on rate outlooks

Sterling rose on Wednesday after Minutes from a Bank of England policy meeting were perceived by the market as pointing to a UK rate rise as early as next month. With no economic data to provide clues, the Dollar crept lower against most major currencies, while the focus shifted toward Sterling and the Swedish crown, which surged after the Riksbank lifted interest rates and unexpectedly let investors anticipate two more hikes this year.
The Yen continued to suffer as investors borrow it cheaply to finance purchases of higher-yielding currencies and assets. The Japanese currency plumbed multiyear lows against the Australian and New Zealand Dollars. Bank of Japan Governor Toshihiko Fukui last week said officials wanted to be sure Capital and Consumer Spending remained firm before pushing interest rates higher.

News and Events:
Sterling rose on Wednesday after Minutes from a Bank of England policy meeting were perceived by the market as pointing to a UK rate rise as early as next month. With no economic data to provide clues, the Dollar crept lower against most major currencies, while the focus shifted toward Sterling and the Swedish crown, which surged after the Riksbank lifted interest rates and unexpectedly let investors anticipate two more hikes this year. Sweden’s Riksbank lifter rates to 3.5% and surprised traders by raising its year-end rates forecast to 4%, pushing the crown up 1.41% against the Dollar at 6.9128. Analyst said �it seems clear that central banks globally are a little more comfortable with the risk outlook and are taking a bit more liquidity out of the market�.
GbpUsd rose 0.26% to 1.9927, as two-week high, and GbpJpy hit a fresh 15-year peak 246.63 after BoE Minutes revealed that officials fell one vote shy of lifting interest rates at a meeting earlier this month. Central bank governor Mervyn King, who favored a hike at that meeting, was among the outvoted.
The Yen continued to suffer as investors borrow it cheaply to finance purchases of higher-yielding currencies and assets. EurJpy was unchanged at 165.56, still in sight of a record high 166.11 done Tuesday. UsdJpy was up 0.11% to 123.57, near a 4 �-year peak of 123.75 hit earlier this week. The Japanese currency also plumbed multiyear lows against the Australian and New Zealand Dollars. Bank of Japan Governor Toshihiko Fukui last week said officials wanted to be sure Capital and Consumer Spending remained firm before pushing interest rates higher. Few analysts expect a BoJ rate rise before elections in late July.
Despite expectations for unchanged US rates, European Central Bank and the bank of England are both expected to deliver two more 0.25% rate increases this year, implying that the Dollar could remain out of favor with investors hunting for rising yields.

Today’s Key Issues (time in GMT):

08.00 EUR June PMI Manufacturing survey 54.5 vs 55
08.00 EUR June PMI Services survey 57.2 vs 57.3
08.00 EUR June PMI Composite survey 56.5 vs 56.8

09.00 CHF June ZEW Expectations

10.00 UK June CBI trends � orders 6 vs 5

12.30 US June 16th, Initial Jobless Claims 312k vs 311k

12.30 CAD April Retail Sales 1.1% vs 1.9%
12.30 CAD April Retail Sales less auto 0.5% vs 1.1%

13.00 US Fed’s Consumer Advisory Council meeting on Home Lending

14.00 US May Leading Indicators 0.3% vs -0.5%

17.00 US June Philadelphia Fed Index 7 vs 4.2

The Risk Today:

EurUsd found resistance these last two days on 1.3440 and is reversing near 1.3373 former resistance. Recent bull trend is only on hold and focus remains 1.3500 and 1.3554 resistance from early June high. Further weakness below 1.3373 could open the way toward 1.3277 key support (50% retracement from 1.2872 to 1.3681 advance). Initial support holds 1.3373 former resistance.

GbpUsd bull trend from Friday 8 June’s rebound remains active. Yesterday break up 1.9900 key level put 2.0000 key and 2.0100 trend levels into focus again. Initial support holds 1.9912 intraday. On the down side, despite 1.9823 support (61.8% retracement of the 1.9733-1.9969 rise); a return under 1.9900 could deep toward 1.9700 and 1.9659 (50% retracement of the 1.9184 to 2.0134 advance) next support.

UsdJpy remains strong after hitting 123.75 Monday’s high. Further advance might open the way toward 125.57 December 2002 high. Strong support is located at 122.22 (former Trendline) and initial support holds 123.10 last Thursday/Friday conjunction.

UsdChf corrected from Thursday high 1.2472 and six consecutive day advance. This 3-months high 1.2470 marks the initial resistance. Return of the Dollar bull trend would open the way for a run toward 1.2573 and 1.2771 trends high. On the current downtrend, market is looking for next support 1.2359 (23.6% retracement of 1.1996 to 1.2470 advance) and further set back to 1.2290 (38.2% retracement).

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Resistance and Support:

By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland