The USD remains unchanged
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The forthcoming issue of the US economic numbers and new interest rate by European Central Bank contributes to slight change of the USD in relation to the Euro and Japanese Yen throughout the afternoon forex trades in Asia.
The US data to be issued includes the unemployment report for the May and non-manufacturing index.
According to Thomas Lam a senior treasury economist at United Overseas Bank the markets are not sure where will the majors move after the ECB will take the decision concerning the interest rate.
It is expected that the ECB will not change the level of interest rate remaining it at its current position of 4 percent. Therefore the announcement the ECB officials will make at the press conference will turn to be quite risky one for the currency market.
As for the latest data the Euro was at $1.5458 and the USD – at 105.10 Japanese Yen. The USD increased throughout the night after the Federal Reserve Chairman announcement about how it affects the inflation in the country.
According to the Ben Bernanke’s speech the Federal Reserve is quite concerned about the impact of the USD on inflation as well as the outlook for inflation. Moreover the Fed will further pursue its policy to prevent any risks to their dual mandate. The USD decreased significantly in relation to the Euro and Japanese Yen as a result of several rate cuts executed by the Federal Reserve since the September 2007. Compare this with the interest rates of the Japan and Eurozone that remained unchanged and contributed to the dump of the USD.
The low USD leads to more expensive imports of goods and oil as well. And the crude oil prices increased recently and reached the record level. Therefore the weak USD is not the one the Federal Reserve is aimed at as it will only contribute to the growth of the inflation in the country.
According to the comments of the senior forex analyst at Thomson IFR – John Noonan the concerns about the US financial sector future recovered and thus the announcement of the Ban Bernanke was quite opportune. He has also added that the there are no more interest in low US currency as the main concern now relates the inflation constraint and not the further economic growth.
