FOREX: Weekly review [E]

America currency by the end of a week showed the most significant rally since November the prior year added 2.1%. USD grew versus yen on 2%, thats the highest since March. From the beginning of a current year dollar drop almost on 7% against EUR on speculations FED will take pause on interest rate to cut the deferential between Europe one.
Interest rates theme still direct market.
The main event became ECB meeting. ECB lifted rate to 2.75% today, as expected. That was the third rise since December last year. However ECB disappointed many EU banks awaited for more aggressive hike in 50 b.p. at once. ECB Chairman Jean-Claude Trichet said at his press-conference that the bank is not going to hurry up with the rate increase despite EU rates are т??still on a historically low level
Michael Shubert from Commerzbank, says : ТЋThe market players understood Trichet message as a hint that July meeting decision wonт??t bring rates upper current level. The nearest rates hike is now awaited on August 31 ECB meeting.
Claus Baadera from Merill Lynch, also says : Trichet strictly hinted that ECB wont hurry up with further monetary policy tightening. Itт??s most likely now ECB to follow the graduate key rates increase on 25 b.p. every quarter.ТЛ
Meantime USD continued set gains as in recent days Federal Reserve representatives expressed their concern on inflation pressure. That led to new speculations that at the nearest meeting FOMC can lift the interest rate for the 17th time successively.
The main support gave Ben Bernanke with his speech on 5th June where he said that т?? inflation pressure growth is unwelcomeт??. Hopes on differentials reductions between USA and EU has disappeared at all.
The nearest FOMC meeting will be at 29th June. Analytics are assured FOMC will bring its benchmark rate to 5.25% from current 5.0%.
Nevertheless rates theme still play in a favor for USD. says Icuko Yamashito from Sumitomo Mitsui Banking Corp. ТЋIn the near future USD will consolidate in a range $1,25 - $1,29 versus EUR in a monthly average. The accompanying statement on a results of FOMC meeting mainly will direct short-term USD prospects.ТЛ.
Fridays data on US Trade balance supported USD on its rally.
Meanwhile, dollar bids have proceeded on a bases of stock markets drop has led to an overflow of the capital on FOREX. Investors are afraid, that prospects of the further growth of interest rates in leading economy as a result will cool corporate profits and jawboning shares.
Strong economic data could not support the yen. Machinery orders hike 10.8% in April, exceeded forecasts that shows optimism among manufacturers on prospects of national economy grows. In March BOJ made the first step coming from zero interest rates. At the moment most of economists predict that the Central Bank for the first time since 2001 will lift the rates from current level to 0.1% in July.
After April 21 the dollar fell 2.2% against the yen after the officials and bankers called the Asian countries to let their currencies to appreciate. Today 2-day's session of G-8 Ministers of Finance begins (St.-Petersburg, Russia) on which they will discuss world imbalances.