Forex: weekly review [E]

Uncertainty on the currency market was from start of week: investors were not serious for actions before FOMC meeting. Attempts to buy an American currency on expectations of interest rates increase in the USA ended with correction. Stable regain of USD from the middle of May, was ended on Thursday. Less pessimistic than expected, accompanying Fed statement led to significant USD drop against main currencies. As a result dollar ended the week with loss 2.1% versus the euro, and tested 3-week lows.
As expected, refinancing rate lifted a 17th time to 5.25%. However, FOMC officials said next steps of the central bank will depend on coming statistic data about economy. Considering that fact, that recent reports didnt help the dollar, market players regarded this statement as a hint at the end of a 2-years cycle of rates increase in the USA. It assumes, that interest rates differential between Europe and the USA bay be reduced in future. At the moment futures for federal funds are pricing in 57% chance of Fed rate gain to 5.5% in August. This probability was 85% two days ago.
Meanwhile, analysts predict, ECB will lift interest rate to 3% during next 3 months, and to 3.25% by the end of a year. According to last data, index of business confidence in region reached 5-years peak in June. This months at least 6 officials hinted at acceleration of ECB rates increase. Interest rate were boosted three times since December, 2005. JPMorgan Chase Co. economists this week raised forecasts for ECB rate to 3.75% by the end of a year. Bank also predicts increase on July 6.
GBP won not only due to general sales of USD, but also on concern revision to assessment of GDP growth. The rate strengthened at 16% on weekly results.
The yen climbed at 1.7% despite scandal about Bank of Japan Governor Toshohico Fukui. Political forces of Japan try to get Fukuiт??s resignation because he invested the fund founded by Yoshiaki Murakami, who has been indicted for insider trading. According to documents, the investment volume was $120,000.