FOREX: Thursday results [E]

On Thursday the dollar versus major currencies remained in former ranges before economic reports, which can show, that higher Fed interest rates will affect negatively on U.S. economy.

Report showed that volume of EU industrial orders in April unexpectedly fell. Therefore decrease of EU industrial orders’ volume observed for 2 months successively. In April orders’ indicator fell for the third time during this year.

In Britain Industrial Production also unexpectedly lifted, informed Confederation of Britain Industry. Index has reached the highest level since February 2005, when it’s value was +19. Confederation also declared that expected industry growth was due to expectations of industry rise in sector of intermediate goods.

Currencies have tested support and fell after reports.

Additional reason of investors’ interest to U.S dollar is also expectation that Fed will continue process of interest rates increase Federal Funds 25 years диаграмма, as recent data testify about inflation growth.

In this connection text of accompanying decision for Fed rates will represent the interest.

“One of the key upside risks is the Fed's message becomes even more hawkish, then we would see another bout of dollar appreciation,” - said Monica Fan, head of foreign exchange strategy in London at RBC Capital Markets.

Fed’s representatives declared, that current levels of U.S. basic inflation indexes (CPI core диаграмма) fell outside the limits of comprehensible values and signaled, they intend to continue rates gain to inflationary expectations restriction.

Now futures markets are pricing in a 100% chance of rate hike to 5.25% at FOMC minutes on June, 29. The chances of another move to 5.5% in August estimate 80%. In the end of last month this probability was equaled to zero.

EUR/USD after consolidation in a range $1.2660/80 starts to go down. As a result it was tested support $1.2580. Significant recoil has not followed and the rate closed in this area.

USD/JPY rose from Y114.68 to Y115.68 during trades. After that the rate stabilized in range of session highs.

Sales of emerging-market currencies and increasing tension with North Korea, which was a reason for yen falling and led international investors to seek the U.S. currency as a haven.

Growth of deficit in the South Africa and New Zealand became major reasons of sales by foreign investors of these countries’ currencies.

The yen led declines in Asian currencies today as the North Korean remarks raised on concern intention to continue test intercontinental rocket, and sharp reaction of world community have caused anxiety about increased military tension in the region.