The euro and sterling rebounded against the dollar as traders almost finished adjusting positions according to recent changes in expectations for the Fed rate outlook. The euro broke a technical obstacle at 1.3340, and initiated an upward trend to reverse recent loss. Should the pair stand firm above the 1.3260 base of the decline from 1.3680 to 1.3260, the upward trend holds with next targets at 1.3430 and 1.3520.
The US CPI report for May came in basically in line the consensus forecast, and had no impact on the market perception that the inflation tends to be moderate and the Fed is likely to hold interest rates unchanged at 5.25%. The CPI rose 0.7%, above the estimate of 0.6%. The core index rose 0.1%, below the forecast of 0.2%.
The euro gained after the ECB council member Axel Weber said the bank is ready to contain inflation, signaling further rate increase. Futures market indicated traders priced in at least one more rate hike by the ECB within the year.
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