Treasury - Daily Forex for day 01.06.2007

The dollar slipped against the euro on Thursday after the second release of U.S. first-quarter GDP growth showed a larger-than expected slowdown to an annualized 0.6%, the lowest in more than four years, from 2.5% in Q4. The analysts had forecast the growth to reach 0.8% in Q1, down from an advanced estimate of 1.3%. However, the dollar regained ground after Chicago Purchasing managers' index of manufacturing activity rose much faster than expected in May. Now the focus is shifting to the U.S. non-farm payrolls report, which is expected to show the economy added 130,000 new jobs in May.

The crown advanced against the euro yesterday benefiting from improved regional mood rather than from a widely expected interest rate hike by the Czech central bank. CNB Governor Tuma cast the decisive vote to raise the two-week repo rate by 25 bps to 2.75% after six board members present at the meeting were evenly split in the vote. While three members wanted to keep rates flat and wait for the next CNB macroeconomic update in July , the remaining three justified the tightening by an accumulation of plenty of smaller inflation risks.