The last forex trades showed the further growth of the Euro in relation to the USD after the comments by the European Central Bank official – Lorenzo Bin Smaghi and unexpectedly high level of the German producer prices. Due to his forecasts there will be further growth of the commodity prices and the interest rates will be increased in case other factors will not contribute to the decline of the inflation level.
The officials of the ECB have already tried to decrease the expectations of the interest rates growth after these expectations had grown throughout the previous month. However as the inflation in the Eurozone is still high the markets expect considerable growth of the borrowing costs.
Furthermore the increased producer prices in Germany have only contributed to the abovementioned markets expectations. According to Daragh Maher a currency strategist at Calyon the high inflation and increased producer prices in Germany hint the market onto a couple of interest rates hikes from European Central Bank.
As for the US news – the interest rates decision is to be taken there next week. It is expected that the Federal Reserve will remain the interest rates unchanged again however the most attention will be paid to its possible growth throughout forthcoming months. Due to Antje Praefcke a currency strategist at Commerzbank in case the Federal Reserve Chairman will add to interest rate growth expectations this will may turn to be a considerable support for the US currency.
However considering the present day data we can say there will be no changes throughout currency trades. The British pound is still at high positions caused by the unexpected retail sales data that has increased 3.5 percent throughout the May. These numbers also caused talks concerning possible interest rates growth by the Bank of England that may take place in spite of the decrease in other economy branches. Therefore according to Thomson at CMC Markets the British pound increases to the point of $1.9750 and may possible reach the level of $2.