Forex outlook:
The dollar gained against the Euro on Wednesday after the U.S. Federal Reserve held interest rates steady and said inflation remains the predominant concern. The widely expected decision by the U.S. central bank's Federal Open Market Committee keeps the overnight federal funds rate target at the level it has held since June 2006 of 5.25 percent following 17 straight quarter-percentage point increases.
"The dollar edged up against the euro because the Fed didn't indicate it is ready to cut rates any time soon," said David Watt, foreign exchange strategist at RBC Capital in Toronto. "They keep pushing that cut further and further away in the year."
Yesterday the Euro was down 0.1 percent at $1.3530 after the decision while dollar/yen was little changed at 119.96 yen. U.S. short-term interest rate futures fell on Wednesday after the Federal Open Market Committee ended its policy meeting. Futures show the market expects the Fed to hold rates steady at 5.25 percent again in June while prospects for a cut in August dropped to 15 percent from 18 percent. Futures now price in just a single Fed rate cut in 2007, against an 18 percent chance earlier that the Fed would cut rates twice.
Today the European Central Bank is widely expected to keep rates on hold at 3.75 pct, however the accompanying statement is likely to take a fairly hawkish tone and markets forecasting a quarter point hike to 4 pct to come in June. Also today the British Central Bank is expected to raise the interest rate to 5.5 pct.
Gold: U.S. gold futures finished down but well off their session low on Wednesday on liquidation by funds and weak copper prices, as investors were largely on the sidelines because the pit session ended before the Federal Reserve's decision on interest rates. Most-active gold for June delivery on the COMEX division of the New York Mercantile Exchange settled down $4.90 at $682.50 an ounce, traded from $677.50 to $688.90. "I think it's just some fund liquidation going on before the Fed decision," said one New York precious metal dealer. After the close of Wednesday's open-outcry session, the U.S. Federal Reserve held benchmark interest rates steady at 5.25 percent for a seventh straight meeting and again said its main worry is that inflation will fail to moderate. Gold is usually seen as a hedge against inflation. Joseph Guzzardi at Sabin Commodities said from the COMEX floor that lower copper futures pushed gold and silver prices lower.
Crude Oil: U.S. crude oil futures fell on Wednesday, but ended above earlier lows struck after a government oil inventory report showed crude supply rose 5.6 million barrels last week and that gasoline and distillate stocks also increased slightly. On the New York Mercantile Exchange, June crude ended open outcry floor trading down 66 cents, or 1.06 percent, at $61.60 per barrel, trading from $60.68 to $62.48.
Pool position:
