Money and Metals

The Australians are reporting the US dollar is stronger tonight. "The US dollar was firmer against the major currencies, and was expected to maintain support as traders price in further rate increases by the US Federal Reserve following Tuesday's hike, dealers said. They said the dollar was bought overnight as US bond yield's jumped, with investors pricing in further rate hikes on positive US economic data while euro zone data was slightly weaker."

"Dealers said the euro fell below 1.2060 usd from 1.2162 overnight on higher US bond yields, while the US dollar/yen currency pair rose to its highest level in 2006 at 118.07 yen. Currency strategists said the euro has unwound its sharp gains of recent weeks which culminated in a four-month high of 1.2323 usd."

"The US manufacturing ISM can also be a useful leading indicator of US capacity utilization, which is currently sitting at 80.7 pct while a rate above 81-82 pct is considered to be inflationary. 'Further upside will make the Federal Reserve increasingly edgy on the inflation front, noting it has specifically said that increased resource utilization has the potential to add to inflation pressures,' (economist) Chris Tennent-Brown said."

"The NAB currency strategists added Tuesday's FOMC statement has boosted US two-year bond yields to 4.57 pct, the highest in five years. They said the implied yield on the August federal fund futures contract has also risen 5 basis points to 4.87 pct which suggests a near 50 pct chance of two more 25 percentage basis point moves."

"The ECB's rate decision tonight is expected to leave its key rate unchanged at 2.25 pct."