FOREX. Tuesday results. [E]

On Tuesday the dollar became stronger against the euro, up from area of 13-month lows. The cause of demand for dollar is the growing probability of Fed rate increase on June 29. Analysts expect rate will be raised from current 5.0% to 5.25%. Analysts JPMorgan Chase Co. changed their forecast in favour of rate increase after Chairman of the Federal Reserve Ben Bernanke expressed fears about inflation in the country. From the beginning of this year the U.S. currency fell 8.8 % on a background of expectations of slowdown in monetary policy tightening while the ECB rate likely continue to grow. Yesterday Ben Bernanke said, that last rise in prices is "unwelcome", that assumes Central Bank may increase interest rates for the 17-th time. At the moment futures for rates of federal funds on 72% priced probability of June rates hike to 5.25%. Before Bernanke speech this probability was 48%. Today Kansas City governor Thomas Hoenig speaks on monetary policy.

Meantime, losses of the euro can have temporary character after today’s published report showed, that PMI service in the Europe reached a 5-years high. It also says well for continuation of rates increase by the ECB. According to statistics, PMI gained in May to 58.7 points (a maximum since September, 2000). Month earlier this index was 58.3 points. Service sector of Eurozone totals 1/3 of region economy which estimated in $10 trillion. Besides according to comments of ECB members, Nout Wellink and Axel Weber, rate increase of ECB on 50 points probably, if oil quotations remains in area 70 per barrel and growing economy will excite consumer prices in the further. Futures show that rates in region will reach 3.5% to December, 2006.

EUR/USD in the first half of the day remained in range $1.2880/1.2930. It tested $1.2933 (50% $1.2980/1.2885) and overcame the bottom reaching the area of bids near $1.2855. The further demand for dollar led to testing $1.2806.

GBP/USD rose $1.8770 before the pair returned to area $1.8750 on the announcement about the sale British BAA for stg10 billion to the consortium headed by Spanish Ferrovial. Decrease of euro-dollar below $1.2900 became the reason of sterling sales which absorbed bids in area $1.8675/70 and touched lows on $1.8650/40.

USD/JPY overcame optional barrier on Y113.00, and then - area Y113.35 (1 June highs), showed session peak on Y113.52 then returned to area Y113.25/30.

European data about retails and industrial orders of Germany will at the disposal of market participants today. The Central Bank of New Zealand will promulgate the decision about the rates.