The dollar stabilized against the majors on Monday following last week’s US data-induced plunge. The greenback climbed to a 4 ½-month high against the sterling to 1.9655 while edging up to 109.72 versus the yen. Sentiment over the direction of global interest rates will dictate currency movements this week, with both the ECB and BoE announcing the results of their policy deliberations on Thursday and Fed Chairman Bernanke speaking on “Financial markets, economic outlook and monetary policy”.
The lackluster US economic reports last week fuelled speculation for a 50-basis point rate cut from the Fed when it meets at the end of the month. However, given the current outlook for inflation it remains to be seen whether the FOMC will move aggressively to stimulate the struggling economy. The coming week will see a barrage of Fed speakers, including Board members Plosser, Rosengren, Poole, Hoenig, Mishkin and Chairman Bernanke. The comments will be closely scrutinized for clues on the scope for additional easing.
Atlanta Fed President Lockhart delivered a somber assessment of the economy, saying the negatives may be gaining momentum and that now is a time of heightened uncertainty. He said that market contacts have expressed serious concern about further market deterioration and spillover. However, he remains troubled by the elevated level of inflation despite expecting inflation to moderate this year. He believes the Fed has been attentive in making appropriate policy responses to the economic situation. Lockhart added that the Fed is balancing concerns about inflation with serious concerns about growth.
No comments:
Post a Comment