The FOMC release dominates today’s tradingReleases from Europe:
May Forecast Actual
German IFO: Business Climate 102.0 103.5
German IFO: Current Assessment 108.0 110.1
German IFO: Expectations 96.4 97.3

There are forecasts and there are guesses. Now the ZEW chief will call his opinion that German growth will be around 2% this year a forecast. However, the HWWI research institute has its own forecast for growth – but that is down at 1.3%. The Bundesbank has a forecast of 1.9%.
The HWWI base their view on the expectation that the U.S. slowdown will also have a negative impact on Germany and made worse by the negative effects of the high energy prices and the strong euro.
Where does that leave us? I suppose rather than forecast we can just guess… Personally I believe high interest rates and inflation will push growth down closer to the HWWI forecast…
However, there was no sign of weakness in the IFO survey which echoed yesterday’s ZEW release. This will keep the market on the Euro’s side for now and probably begin to look for potential of a rate hike from the ECB.

The following economic releases are due today:
April
U.K. PSNCR GBP -2.5bn
U.K. PNSB GBP 1.5bn
U.K. M4 Sterling Lending GBP 16.0bn
M4 Money Supply (MoM) +0.6%
M4 Money Supply (YoY) 11.1%
May
Swiss ZEW Survey: Expectations
The Bank of England is due to publish the minutes of the last monetary policy meeting
The FOMC minutes of the 29th- 30th April are due to be released

The German IFO survey has injected a spring into the Euro’s step but ahead of the FOMC minutes there are several barriers that should be watched that could prevent a runaway weakening in the Dollar. Key Dollar supports are at 1.5738 Euro followed by 1.5773-83, and for the Swissie at 1.0310 while the Pound should struggle to regain last night’s high at 1.9717. Also note support in Dollar-Yen at 102.81-98.
The Dollar has remained soft on the back of a combination of slightly less negative news from Europe and the prospect of Euro-zone interest rates remaining firm, possibly even rising as the ZEW chief suggested.
This has taken the gloss off the Dollar and will cause the market to scrutinize all comments from the FOMC although the gist was probably given by Kohn who declared the current policy as correctly balanced between the continuing risks in the credit market versus inflation.
In particular the market wants to see how strong the opinions were amongst the FED members concerning the possibility that the CB has ended their easing process. Kohn confirms that it is all up to future news from the economy but just how much evidence there is of any improvement in growth will be the key factor.
So far employment numbers have continued to deteriorate while consumers remain anxious over the level on inflation that is severely reducing their spending power. No doubt the market will be mostly quite ahead of the release though technically there seems only limited immediate downside to the Dollar with the prospect of another correction higher likely.

Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 104.34-68 1.5810-45 1.0430-77 1.9778-10
Res: 103.45-95 1.5710-38 1.0380-15 1.9690-17
Spt: 102.81-98 1.5611-30 1.0310-39 1.9610-27
Spt: 102.18-56 1.5560-90 1.0220-43 1.9500-40
See Also

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