The Euro plummeted against the Dollar reacting to news that the European Central Bank maintained its 2012 inflation forecast unchanged, signaling that the pace of euro zone interest rate hikes may be slower than previously thought. Even though ECB President Jean-Claude Trichet used code words that signaled a July increase in the benchmark refinancing rate from the current 1.25 percent, markets had already priced in the prospect of a July hike. This left little room for a further rise in the Single Currency. EURUSD slid from a high of 1.4647 down to 1.4476.
Sterling declined against the Dollar in the U.S. session, falling from 1.6405 to 1.6357 after the Bank of England kept rates on hold at record lows at 0.5 percent. Even though this was in line with expectations, investors see the risk of more selling in the British Pound, given recent weak economic data that give evidence the UK economy is struggling to recover, preventing the BoE from raising rates even as inflation risks remain high.
The Swiss Franc was weaker against the Dollar, as the greenback rose to hit highs of 0.8445 well above its record low of 0.8326 reached on Monday this week after the Dollar was battered on weak U.S. jobs data and concerns of a slow U.S. economic recovery. The market was more upbeat today for Dollar appetite after the U.S. released trade balance data indicating the trade deficit narrowed more than expected in April from the previous month.
The Canadian dollar hit a new month high against the greenback in the U.S. session, with the USDCAD pair dropping from highs of 0.9799 to 0.9722. Rising oil prices helped boost the Loonie which is a commodity-linked currency. Crude oil hit a month high of $102.42 lifted by concerns arising after OPEC failed to agree on raising output at a meeting yesterday.
Spot gold prices rose steadily in the U.S. session, hitting a high of $1,549.33 from the open of $1,534.73, making the biggest one-day gain in two weeks, as the increase in oil and grain prices raised concerns that inflation was heating up. The precious metal is generally used by investors as a hedge against inflation.
Note: Daylight Savings Time in Effect