European focus: Strong expectations Fed rate rise in June may support the dollar [E]

The U.S. currency may continue its growth for a second day against the euro and the yen, because market participants more rely on increase expectations as to June rate hike after yesterday FOMC Minutes, that suppose Central Bank may increase the key rate for 17^th time (Federal Funds 25 years диаграмма Federal Funds 50 years диаграмма). That helps the dollar to recover from 3 months lows against the Euro and two against the Yen.

Dollar’s consolidation has stopped today after published data showed unexpected growth of manufacturing Europe PMI in May to 6-year highs. Interest-rates futures priced 76-% possibility rate hike to 5.25% in June. Before the May FOMC minutes this possibility estimated as 58%. The major ECB rate is 2.5%, the Bank of Japan – 0.1%. The euro losses today also were temporary and it was caused by continuing speculations about future increasing of interest rates of ECB on June 8 meeting, it will be the 3^rd increase since early December. Inflation level is staying near the ECB target on 2% during for 16 months. Futures suggest that to the end of this year rate in Europe will rise to 3.25%.
The yen strengthened against the euro. It was based on optimism of investors about the development of the Japanese economy which can handle higher rates. The member of BOJ Hidehiko Haru said today, that Central Bank recognises the risk of “late actions”, holding the rates at low level. The head of the Central Bank Toshihico Fukui said that bank djesn’t give any preference to some economic index in making a decision about rates. Meanwhile dollar’s growth may stop before the manufacturing ISM (ISM manuf. диаграмма). Analysts suggest that index of manufacturing activity in May will fall to 55.6 from 57.3 in April. According to the forecasts price component rose to 74.6 from 71.5.