Optimism rising

The positive vibes have started coming now. Oil has consolidated itself in the 128 area (Though one bad news and you can still see a 135 or odds). Financials are hoping now of scraping through with the small injuries of the past year. And as I had last stated, the chances of a Fed rate hike have really improved.

To quote one news article "Philadelphia Federal Reserve president Charles Plosser warned in a speech that a hike in US interest rates was unavoidable in the short-term in the face of inflation pressures. While Plosser is seen as one of the most hawkish members of the Fed's rate-setting committee, his remarks rekindled speculation about possible US rate hikes that could boost the dollar. The dollar also found support from US Treasury Secretary Henry Paulson, who reiterated Washington's preference for a strong currency and renewed his backing for troubled US mortgage finance giants Fannie Mae and Freddie Mac." Unquote.

That both the Yen and the Euro are still stuck in the ranges I mentioned yesterday, is to do with the fact that though the things have improved, market is still not overtly sure as to how long it will last. Remind yourself of the negative sentiments in the markets in the past one year, and you know why. Thus, expectations on the Yen doing a 108 plus seem bleak in the short run (by weekend) , though remaining weak near the 107 mark against the dollar seems a given. A similar story for the Euro, where chances of a rate hike in the near future are markedely lower than in the US. Expect the Euro to range in the 1.57 to 1.59 with a weak outlook against the greenback.