The US dollar is experiencing another episode of appreciation as Janet Yellen said that the interest rates will rise this year, as the economic conditions are likely to make this decision possible at some point this year. In addition, Federal Reserve Bank of San Francisco President John Williams declared that September is the most appropriate time for an interest rate hike while by the end of the year there is enough space for the second rate hike.
The way for such news was paved by positive economic data as: the PPI up to 0.4%, Core PPI up to 0.3%, the Empire State Manufacturing Index up to 3.9 points, the Capacity Utilisation Rate up to 78.4%, the Industrial Production up to 0.3%, the Unemployment Claims decreased to 281k, NAHB Housing Market Index increased to 60 points, TIC Long-Term Purchases advanced to 93 billion and only the Philly Fed Manufacturing Index decreased to 5.7 points.
On the other side, the single European currency gained some temporary momentum yesterday as Mario Draghi announced that the monetary policy together with the economic assessment were left unchanged. Inflation bottomed earlier this year, and is expected to remain low over the next several months before rising later in the year. Draghi expressed confidence that the decline in the euro will bolster exports, while the low price of oil will help consumption.
On the other side, there is the Greek problem which was intensely discussed. European Central Bank President Mario Draghi said he views the country’s place in the euro as secure, but the German lower-house vote concerning the 86 billion euro bailout represents the real challenge. Yesterday, President Mario Draghi announced that ELA was extended to 900 million euro for a week, while today they have to decide over a bridge loan consisting of 7 billion euro in order to help Greece survive until the bailout is ready (pay an overdue payment on Monday to the IMF due to 3.5 billion euro and probably open the banking system on Monday).
The EURUSD is still below the 1.0910 resistance level as the pressure is barely tolerated. A breakdown of the local support level at 1.0855 could easily bring the quotation down to 1.0815 – 1.0800. The German index DAX is doing well as it managed to stabilize above the resistance area at 11700 points. If the European session doesn’t bring a negative gap, the market may continue its upward trend towards 11800 points.
The USDCAD is running up to 1.3000 – 1.3060 as the Central bank of Canada announced a cut in its interest rate of 0.25% (currently the interest rate stays at 0.50%). Other factors that are pressuring the Canadian dollar represents the falling price of oil and the estimate fall of investments by 40% in the oil industry.
The NZDUSD is continuing its descending trend as the monetary policy divergence is dictating the tendency. The quotation fell below an important support level at 0.6565 (active since September 2009) and a breakdown of the local support at 0.6500 could send the price down to 0.6450.
