Forex: weekly review.[E]

Considering stabilization in the world trade platforms the dollar which during several last weeks played a role of currency - refuges, for last five days has a little given in.
The dollar lost 0.2% versus EUR, decreased on 0.55 against sterling and strengthened on 0.9% against Japanese yen in a weekly average.
USD opened last week boosting gains on speculations lead by inflation data and possible FED rates hike.
PPI ex. food and energy appeared above forecasted one as Labor department informed.
" The report has confirmed validity of Fed fear concerning inflation, " said Richard Franulovich, Westpac Banking Corp. " Fed will go on necessary boosting rates to curb inflation pressure that will play in favor for dollar. " the analyst believes.
The CPI core ex. food and energy figures showed unexpected increase in May that remains among the main inflation data.
Recent performances of FED representatives give the basis to speak that the problem of increase in price pressure remains the basic principal cause of anxiety of the central bank.
FED Cleveland President Sandra Pionalto supported colleagues and also emphasized concern on inflation. т??Recent inflation data worry me but were expected.т??-she said. т??The main CPI lifted on 35 for the last three monthsт??, she marked and added that in case of tendency continuation the inflation can exceed т??comfort level''.
Other Fed representatives supported her speech with the same tendency.
All this urge on Fed benchmark rate increase by the end of current months.
Futures traders are pricing in a 100% chance the Fed will raise its benchmark to 5.25% at the June 29 meeting. This possibility made 90% on Tuesday.
Moreover, further inflation growth can prompt additional key rate hike in August. This possibility now estimates in 67%. Remind that last months it made zero level.
As a result the rumors FED rates hike can suspend economy growth followed. This doesn't play in favor for USD.
Economic data intend on economy slow down and cause markets concern. The sharp drop of the beginning of construction of new houses has been fixed in prior months. The given indicator felt to 17 months lows and can testify serious reduction in demand for real estate on behalf of constantly increasing borrowing costs.
Industrial Productions Ind. Product in May drop on 0.1% after 0.8% growth in the prior month didnт??t inspire market.
The government report has fixed the slowdown of retail sales in May to 0.1% versus 0.5% in April. Nevertheless, the index which exclude auto sales appeared nearer to expected level of 0.5% after growth at 0.8% month earlier.
This fact showed that despite some cooling, consumer activity in the USA remains on the high level.
The Commerce Department highlighted the lowest for last three months Retail sales growth.
According to data of Treasure International Capital Systems (TICS) report about inflow of U.S. assets international investors in April bought American shares and bonds in amount $46.7 bln. Data appeared less at 34% than in prior month and became the lowest since March 2005.
As a result fears regained concerning U.S. assets inflow will be insufficiently for covering of foreign trade deficit which made in April $63.4 bln..
This time the market sentiment changes, says Ian Stannard, BNP Paribas SA. ТЋInvestors focus on economy slow down problems.ТЛ
Considering, undoubtedly Fed rates hike by the end of June that is already priced by the market, additional certificates of economy cooling can prompt pressure amplify upon the American currency in the nearest period of time.
It should also be reminded yen drop versus USD and EUR.
BOJ intention to raise the norm of reservation for commercial banks on 0.5 b.p. up to 8 % since July, 5th norm remained the initial cause of pressure upon JPY on prior week.
The given decision was made to curb investment boom which threatens price stability. As a result economic growth slow down and a consumer demand in the largest export market of Japan can be awaited.
BOJ decision on leaving its key rate unchangeable didnт??t played in favor for Japanese currency besides Fed hint on further rates hike that supported USD on itт??s yen-winning pace.
As a result yen weekly drop made 0.9% against USD and EUR.
Quotations of the Australian, New Zealand and Canadian dollars decreased also.
The dollar got an additional support after C/A deficit reduced in 1Q 2006 to $208.7 bln. compared with $223.1 bln. in 4Q 2005.
Economists expected less slump of major index characterize foreign trade and predicted deficit at the level $222 bln.
The American currency continued strengthening after unexpectedly strong data issued on American customers sentiments in June
According to data of Michigan University survey of American customers sentiments Michigan sent. Index аДаИаАаГб?аАаМаМаА gained to 82.4 to 82.4 in comparison with 79.1 in May. Analysts predicted insignificant indexт??s decrease to 79. It is necessary to note that economic data give attractive picture of the U.S. economy.
Thursday showed American Initial Claims fell to lows during last 4 months and made 295,000 according to Labor Department .
Besides, it is necessary to note that reviews of region Fedт??s manufacturing activity in New York and Philadelphia fixed growth of manufacture and indexes of new orders to highest levels for last months.
Nevertheless, it is necessary to note, that despite of volatile trades within a week the dollar against the basic currencies remained within the limits and narrow ranges that speaks about market playersт?? absence of further perspectives vision of currency market. Most likely, the similar situation will keep in the beginning of next week.