The U.S. dollar (USD) was able to regain some strength today on the back of two important events:
1. The U.S. government reported that inflation, via the consumer price index (CPI), is on the rise in the U.S.---prompting renewed hopes that the Fed may actually raise interest rates this year.
2. Wells Fargo and other in the financial industry beat Wall Street earnings expectations and sent the U.S. stock market soaring higher---the Dow jumped 276 points to close above 11,000.
However, the USD is not out of the woods yet. Oil and commodity prices, while lower than they were a few days ago, are still at extreme highs and the U.S. housing and credit markets are still shaky at best.
PREVIEW: 17 JULY 2008
Forex traders are hoping to get more perspective on the outlook of the Fed and what the chance of an interest-rate hike this year is tomorrow as FOMC member Kroszner speaks. We will also be able to weigh his comments against the outlook of both the Bank of Canada (BOC) and the Bank of Japan (BOJ) as we receive the monetary policy reports from both institutions tomorrow.
Many are starting to speculate that the BOJ may actually raise interest rates sooner than the Fed if inflation continues to climb in Japan. The BOJ will most likely keep interest rates above the rate of inflation.
As far as economic announcement go for tomorrow, keep your eye on the following:
Also, keep an eye on Wall Street. A 2.52% gain on the Dow today is no guarantee we will see anything similar tomorrow. If the U.S. stock markets reverse tomorrow, we could see the USD lose ground and the Japanese yen (JPY) gain ground as the VIX climbs again.
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