Dollar (over)-reacts to comments by Bernanke; European rate news awaited.
June 6th - Comments by Ben Bernanke surrounding rising US core inflation yesterday left traders jumping into long dollar positions amidst another round of speculation that the hawkish stance at the Fed will prevail for that bit longer yet. It’s worth bearing in mind however that the greenback had been looking rather oversold at the start of the trading week and many may have been seeking an excuse to book some profits, so again this latest swing may yet prove to be somewhat overdone. With little due for release on today’s economic agenda, traders may now start looking ahead to the ECB and MPC rate verdicts due Thursday – there’s no real belief that UK borrowing costs will rise this time around but expectations are that we’ll see an improvement in yields in Frankfurt, possibly even by as much as 50 basis points. Obviously any scaling back of these estimates stands to put EUR/USD under some further pressure in the near term but once again it’s a case of it being all to play for as those key psychological levels of 1.30 on the Euro and 1.90 on cable continue to hold…
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