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06/01/2008 - A Fed rate hike? Not so fast

Posted by FOREX.com's Weekly Strategy in May 30th 2008  
* A Fed rate hike? Not so fast
* Short-term outlook for the USD
* Rate decisions due from RBA, RBNZ, BOE, ECB
* Key data and events to watch next week
* Commodity currency updates

The greenback picked itself up off the mat, dusted itself off and rallied back from the brink, aided by a surge in US interest rates. Over the course of this past week, US 10 year yields rose 30 points at their highest, before finishing out up 20 bps just above the key 4.00% level. 2 year yields rose over 30 bps, but finished out similarly up about 20 bps and just above the 2.60% level. The proximate cause for the jump in rates was a widely expected upward revision to 1Q US GDP (from +0.6% to 0.9%) and a stronger than expected April durable goods report. The better data came on the heels of several weeks of heightened anti-inflation rhetoric from Fed officials, which was compounded with additional inflation warnings this week from the Fed's Stern and Fisher, which coalesced into increased prospects for a Fed rate hike. A rate hike?  Full text »

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Filed under: Weekly Strategy