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Euro Boosted By Foreign Bids

Todays consumer price index figures boosted the probability of a rate hike decision by the US Federal Reserve on June 29^th, adding to dollar strength.  Futures traders are even betting on that side, pricing a 100 percent probability of that occurrence.  But to the chagrin of dollar momentum traders, the currency pair reversed in favor of the Euro counter with some even questioning the data.  Although inflationary pressures continue to remain alive and well, it seems that higher energy costs and rent are eating away at individual personal income.  Subsequently, the figure actually fell in the month, below the advance expected.  What did move the market seemed to be heavy buying in the market on an option protection.  Shortly following the figure, rumored Russian, Middle Eastern and Asian parties were noted buyers near the 1.2525 figure that prompted a short squeeze.  The aforementioned triggered stops on the way up, exacerbating the upward momentum and leading the pair higher.  Looking ahead, traders will be eyeing the zones consumer price index for a drift higher by 2.5 percent.  The figure should feed into some speculation of more hawkish rhetoric to be expected by the European Central Bank.

Rumormill

Bids are emerging above the current spot at the even figure and above at 1.2605 as protection of rumored knock out surface around the 1.2525 figure.  Comparable selling resides at the 1.2650 session high with stops above at 1.2700 keeping the Euro bias at bay.

GBPUSD

British <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />PoundMoves In Step With Euro

The pound sterling gained on the day in similar fashion to the Euro as the European single currency inspired simultaneous buying in the pound major.  As a result, following the US consumer price index figure, traders bid the sterling in tandem with the Euro, reaching from the 1.8357 lows to the session highs around the 1.8500 figure.  Exacerbating the upward climb was rumored buying on merger related demand following a release indicating a bidding competition involving Goldman Sachs and Macquarie for AB Ports or Associated British Ports Holdings PLC.  In addition, Chinese revaluation gossip also hit the streets and prompted many a trader to consider dollar shorts on the day.  Nonetheless, market sentiment is strongly focused on the inflationary suggestions as they relate to the rather hawkish beige book report revealed today.  Next up looks to be the UKs May retail sales figures, anticipated to be released tomorrow.  Consensus is expecting a higher figure, rise by 0.5 percent on the monthly comparison, for the report which could spark some much needed bullishness on the retail sector.  However, the masses remain skeptical as the results may be skewed by pre-World Cup merchandise buying and not fully reflective of improved consumer sentiment.

Rumormill

Buying comes in the form of 1.8450 with further bidding emerging at the 1.8425 level. With stops above, comparative short sentiment is residing above the session high at 1.8530 and 1.8560.

AUDJPY

Gold Contracts Continue To Add Weight

Conversely, the Australian dollar saw more downside than the above two currencies to round out the third of our three top market movers on the day.  Again, the market saw gold as a major driver in keeping gains on the commodity bloc component under wraps.  Shifting briefly to the commodities markets, gold bullion contracts added a sliver of hope by trading higher to bounce back near the $570 level.  However, with sellers still in the thick the contract traded lower back to $554.  The rather heavy short pressure on the contract, coupled with further hawkish comments from voting Fed members and a concerned beige book, led the Aussie lower on the day with further downside expected in the Asian session.  Continued short interest looks to surface around the 0.7350 figure where rumored stops are said to be planted.  Subsequently, the only reprieve in sight looks to come from a potentially positive RBA bulletin report due out on Thursday. 

China Reval On The Brain

On the flipside, yen strength was bolstered by revisited revaluation speculation on the Chinese yuan.  Trading below the 8.00 figure for the second time since the market bucking decision of last July, speculation arose over the possibility of further efforts to remain flexible given the recent string of events.  Expanding previous restrictions on FX market operations and marking commitments for easier out and inflows in the country, it wouldnt be a surprise if the Peoples Bank of China announces a revaluation decision.  However, given the steadfast commitment to economic and monetary stability, traders may found holding their breath till they turn blue.