Forex: Monday results.[E]

The dollar fell for the first day in three against the euro and yen on speculations USD growth will stop ahead FOMC meeting. Today’s decrease reduced monthly USD gains to 1.9% against the euro and 3.3% versus the yen. The dollar got support due to strong inflationary data, which strengthened Fed rate expectations.

“Inflation has surprised to the upside, inflation expectations also remain above the comfort level and markets are looking at a 50% chance the Fed move rates in August," said Marcus Hettinger, a currency strategist at Credit Suisse Group. We would be bullish on USD against everything." He added and foreshadowed further dollar gain to $1.2435 by the end of current week.

This time market boost bets on August rates hike after Fed will lift it’s key rate to 5.25% on it’s meeting June, 29.

EUR gains accelerated on Monday after an announcement that the United Arab Emirates central bank decided to raise euro reserves by 10% (or $23 bln.) Last year worldwide central banks reduced USD reserves to 68% from 72% in 1999. Euro may continue restoration in a view of planned economic reports which may show inflation and business confidence held near a 15-year high. If forecasts will be justified, the probability of further interest rates rise in Eurozone will increase. Later EUR strengthening was lead by Italian win on a World Cup Champion 2006 as traders say.

EUR/USD lifted from $1.2500 to resistance on $1.2580 before consolidating within the range $1.2535/70. Later the rate climbed $1.2600, testing offers and rebounded to $1.2570/80.

GBP/USD mainly remained in a range $1.8165/$1.8240.

USD/JPY traded within the limits Y116.10/50.

ECB has also informed on Monday, deficit of Eurozone in April came E8.0 bln. versus E0.1 bln. in March 2006. Analysts expected April deficit E3.5 bln. EU outflow of direct and portfolio investments data made in April E5.7 bln. after inflow in E48.4 bln. m/m.

Tuesday focus will be on June business optimism by German economic research institute IFO, as well as US Consumer Confidence data.