The euro and sterling slump against the dollar as traders trim bets on further rate hikes after monetary policy meetings. The greenback extended its strength gained from yesterday¡¯s FOMC statement, which indicated inflation remained the predominant concern of the Fed. The euro fell off the 1.35 handle and reached a one-month low at 1.3563 against the dollar. The sterling slid from above 1.99 to as low as 1.9773.
The Bank of England raised interest rates from 5.25% to 5.50% as expected. The sterling lost its ground as the accompanying statement somewhat disappointed the market. The central bank did not indicate further monetary policy actions, however, another rate increase by the year-end has already been priced in.
Meanwhile, the European Central Bank left the benchmark rates unchanged at 3.75% as forecasted. ECB Chairman Trichet said the bank will be strongly vigilant on the inflation, reinforcing the expectations for a rate hike in June. However, the euro failed to gain from Trichet¡¯s hawkish talk as it was as the market anticipated.
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