French duty rate thus increased by 2 points of 3

The euro and the dollar yesterday were elbow-to-elbow to obtain favors from foreign exchange dealers on bottom of the Outlook for higher rates of both sides of the Atlantic. The Federal Reserve began its monetary policy meeting today and tomorrow will make its decision. Its release is especially expected, hoping for clues to the sequence of events after a new rate hikes early this week to 5.25. The European Central Bank (ECB), it multiplies the statements by the voices of its different members. Result, the euro changed yesterday between 1,2563 and 1,2619 dollar. At the end of meeting, it was worth 1,2587 dollar. Against the yen, the single currency reached a new Summit in 146,64 Yen in session, while the scandal surrounding the Governor of the Bank of Japan is not weakening.

Yesterday, Jean-Claude Trichet, President of the ECB, yesterday said that the institution would "continue to do what is necessary". And to say that "the Board of Governors is continuously alert." The central banker also noted that the action of the institution was not predetermined. Monday, Yves Mersch, the President of the Central Bank of the Luxembourg, had indicated that it was incorrect to conclude that the ECB could only "Act every three months by stroke of 25 basis points".

And according to Bloomberg, the Greek central banker Nicholas Garganas was also suggested the possibility of an acceleration in the movement. "If the need for a more aggressive rate adjustment to be felt, nothing do we prevent this decision", he said, not excluding this possibility. "All recent data indicate that risks to price stability are increasing and have increased", he added.

For some, these shifts of tone would be explained by a strengthened economy, but by the euro at a lower level also. Yesterday, the market was by twice the evidence of an improvement in sentiment in business. In Italy, the business confidence index was also pleasantly surprised the market. This indicator is now 98.9 points in June, after 97 in May. Economists on average hoped 96.3 points.

Risk now on the rise

In Germany, the IFO index has improved beyond expectations (read also our information on page 7). It is located this month at 106.8 points after 105.7 points in May. Economists on average projected an index to 105 points. This improvement is the progress of current estimates (moving from 107.3 to 109.4) and forecasts (104,2 against 104). For the experts, the current context of the football World Cup could well have contributed to increased confidence.

"These latest figures confirm our positive forecast Germany growth in the coming months, with an acceleration of the growth rate of one quarter on the other to 0.7 for the period March-June", said Erik Sonntag at ING. "Nevertheless, in light of the recent surprise in confidence (in Belgium, Germany) indices, the ECB might discuss an acceleration in the pace of its rate lifts.". If he maintains his scenario to a rate of refinancing to 3.25 at year end, the Economist should be that the risks are now on the rise.

Barlcays Capital team has, as she decided to change its central scenario. While he assumed until now on next raising of the rate of refinancing at 3 on 31 August, the institution now expects to something as soon as the meeting of 3 August. The market in is not even to imagine a recovery as early as next week.

Two other rounds of screw

For Barclays Capital, two other towers of screw could be decided in October and December, with the rate to 3.5 in euro year area. Jean-Claude Trichet may shower the expectations of the market, as it did in early April. But Julian Callow, in Barclays, this would be to demonstrate that the ECB will continue very gradually, in contrast to willingness to display total flexibility.

The Bank is not the only one to have noted its expectations. Yesterday, the rate of Euribor 3 months contract deadline December was stretched 3 basis points to 3,625. In other words, market incorporates the idea of a rate of 3.5 year refinancing to 86. On State bonds, if the decline in sales of existing homes in the United States helped to temper the tensions observed in the first part of day, the meeting was, what it is, was synonymous with rebound in yields on securities in 2 years. French duty rate thus increased by 2 points of 3.55.