Major currency pairs trade in narrow ranges today due to US Independence Day.
The British pound extended its gains versus the dollar on speculations that the Bank o f England may surprisingly lift interest rates to 5.75% on monetary policy meeting ended Thursday morning. The currency reached as high as 2.0205 against the dollar on Wednesday.
The euro stands firmly above the 1.36 handle versus the dollar. Euro-zone services PMI increased from 57.3 to 58.3 in June, indicating manufacturing activity growth quickened. While another report showed retail sales in the euro-zone increased less than expected in May. The market will focus on the European Central Bank interest rate announcement tomorrow morning. It is widely expected that the ECB will keep rates at 4.00% unchanged. ECB Governor Trichet will give a speech at the post-meeting press conference at 8:30 EST. Should he speak in hawkish tone about inflation, the market will take this as a signal for further rate increases, which will give the euro a boost. In the past, analysts usually look for the word “vigilance” in his word to assess the central bank’s attitude towards inflation control.
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