Treasury - Daily Forex for day 28.01.2007

The dollar firmed against the euro on Thursday, underpinned by a rise in U.S. Treasury yields to 5-month highs. On the contrary, the euro was under preessure from a softer-than-expected report on business sentiment in Germany. The Ifo institute reported its headline index dropped to 107.9 in January from December's 108.7, lagging forecasts for a rise to 109.0. Going forward, the markets will look to U.S. durable goods and new home sales data for December this afternoon, the last important set of U.S. economic data before the Federal Reserve meeting next Wednesday.

The Czech National Bank left interest rates on hold yesterday, in line with market expectations. The decision to keep the two-week repo rate at 2.50% was unanimous. The bank also presented a quarterly update of its macroeconomic prognosis, in which, as expected, it cut its inflation forecasts. The yoy price growth is now seen at 2.4-3.8% in December 2007, and 2.8-4.2% in June 2008. The midpoint of this year's GDP growth is forecast at 5.3%, slightly lower than a 5.5% growth predicted in the October outlook. The bank also added that the new forecasts are consistent with stability of interest rates in the nearest months, which signalled that the next interest rate hike may come as late as during summer months.