Dollar Rallies Despite ECB Rate Hike

Thursday provided a
stark contrast to earlier in the week
with a slew of market moving
economic news hitting the wires. The Bank of England left interest rates
unchanged for the tenth straight month

while the Indian Central Bank and European Central Bank (report)
both opted to raise key interest rates by 25 basis points. The moves, all of
which had been widely expected

The Labor Department reported Initial Jobless Claims fell last week, with the
drop far more than economists had been expecting

The Commerce Department reported a rise in Wholesale Inventories and Wholesale
Sales (report).

As if all that wasn’t enough for the markets to digest, the US military
confirmed that Al-Zarqawi was killed last night in a coalition air strike.

Bond prices responded by closing modestly higher. Despite the modest price gain
there was some notable news in the bond market as the yield on the 10-year
Treasury closed below the yield on the 2-yr Treasury for the first time since

The US Dollar Index continued its oversold bounce, as the Dollar rose strongly
against all the majors. The Dollar gained more than 1% versus the Euro despite
the ECB’s interest rate hike.

July Crude Oil futures closed slightly lower for the third consecutive day,
along with Unleaded Gas and Heating Oil. Natural Gas closed higher after hitting
a new contract low yesterday.

The softs were mixed, Orange Juice +2.68% and Cotton +1.34% registered the
biggest advances, Sugar -1.25% and Cocoa -0.81% were the only decliners.

All the grains closed lower, with Corn -2.19% and Soybeans -1.55% hardest hit.

Economic News

Initial Jobless Claims Down 35,000 To 302,000; 4-Week Moving Average For Claims
Down 5,750 To 327,750 (report)

Indian Central Bank Raises Key Interest Rates By 25 Basis Points To 5.75%

Bank Of England Leaves Interest Rates Unchanged At 4.5% (report)

Wholesale Inventories Rise 0.9% In April; Wholesale Sales Rise 1.3% (report)

EIA – Gas Inventories Rise 77 BCF

European Central Bank Raises Key Interest Rates By 25 Basis Points To 2.75% (report)

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Ashton Dorkins

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