U.S. Dollar Mixed at Mid-Session; Bank of Canada Signals Rate Hike

The U.S. Dollar is trading mixed at the mid-session, postinggains versus the Euro, Swiss, and Japanese Yen while struggling against theBritish Pound, Canadian Dollar and Australian Dollar.

The U.S. Dollar is trading mixed at the mid-session, postinggains versus the Euro, Swiss, and Japanese Yen while struggling against theBritish Pound, Canadian Dollar and Australian Dollar.

The EUR USD remains under pressure on concerns the recentlyapproved European Union rescue package will not be enough to stem the financialslide in Greece.Borrowing costs continue to plague Greece with the cost of debt eatingup much of its cash flow. The spread between Greek Bonds and German Bundsremains wide indicating that investors believe an investment in Greece is ahigh risk proposition.

The British Pound surged to the upside this morningfollowing the release of better than expected Consumer Price data. Today’sfigure sends a signal that the Bank of England is likely going to pass on anincrease in its quantitative easing program at its next meeting in May. Theincrease in inflation came as a surprise to the central bank as well as marketparticipants because the BoE has been warning about the possibility ofdeflation. Gains are most likely being limited today by election concerns. Manytraders feel this market is not likely to trend until after the May 6thelection. Furthermore, traders are still worried the election will result in ahung parliament which will make it difficult to pass legislation to curb thewide U.K.budget deficit.

Stronger demand for higher risk assets is helping to drivethe USD JPY higher. Signs that the global economic recovery is back on track isleading investors to take on more risky assets like gold, crude oil andequities.

The Bank of Canada voted this morning to leave interestrates at 0.25% but strongly hinted that interest rates would increase soonerthan expected because of the strong economic growth and the fear of inflation.For over a year, the BoC has indicated that rates would remain low until atleast July 1. Today’s policy statement indicates that June 1 is likely the daterates will begin to rise.

The weaker Euro is leading to a stronger USD CHF. Tradersare anticipating more intervention by the Swiss National Bank in an effort toprotect the currency and the Swiss export market.

The AUD USD is up sharply on renewed talk of anotherinterest rate hike by the Reserve Bank of Australia in May. The RBA’s minutes released early this morningindicated that policymakers are concerned about inflation because of increasingdemand for Australian exports.

The NZD USD is struggling at the mid-session after an earlyrally. The initial move to the upside today was triggered by the strong AussieDollar. Traders are currently assessing the odds of an interest rate hike bythe Reserve Bank of New Zealand.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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