Michael Woolfolk of Bank of New York Mellon says even though ECB President Trichet did not use the word "vigilance" to signal an imminent rate hike, "it is clear that a rate hike is in the works for later this summer, perhaps as early as next month." Trichet's "direct statement that a rate hike at the July meeting was 'possible' certainly is as close to signaling a hike without actually precommitting to one,"Woolfolk says. Nevertheless, he questions why Trichet chose not to usethe "V" word, especially since the ECB President recently indicated that it had not been removed from his vocabulary. "The answer may well be that doing so could push the euro back towards record highs against the dollar and he would like to avoid doing this if possible," Woolfolk says

"I am surprised that the ECB feels the inflation risk is so imminent that they are considering rate hikes,'' said Espen Furnes, an Oslo-based fund manager at Storebrand Asset Management, which has the equivalent of $48 billion. "A rate hike would dent European growth next year which is obviously negative for stocks.''

On and up, trading to $1.5590 now and just shy of the $1.5600 level that one trader earlier suggested may provide a nearby objective. Backdrop of surging crude,
now up $5 on the day and over $127.00 bbl adding to euro strength.

The euro rose the most in two weeks against the dollar and gained versus the yen and the British pound after European Central Bank President Jean-Claude Trichet said an interest-rate increase in July is ``possible.''
The rally snapped three days of declines against the U.S. currency as Trichet said policy makers are in a state of ``heightened alertness'' over inflation. The yen dropped to a three-month low versus the dollar and fell the most against the euro since March as an advance in stocks encouraged investors to buy higher-yielding assets funded in Japan.
``Trichet's comments are more hawkish than expected,'' said Marcus Hettinger, a currency strategist in Zurich at Credit Suisse Group, Switzerland's second-biggest bank. ``We don't expect the Fed to hike anytime soon, so there's still a substantial interest-rate advantage for the euro.''
The ECB kept its main refinancing rate at six-year high of 4 percent, where it has been since last June. The Federal Reserve has cut its target seven times since September, to 2 percent, to stave off a recession.
The pound fell for a second day against the euro after the Bank of England kept its key interest rate at 5 percent today.
Futures on the Chicago Board of Trade showed a 69 percent chance the Fed will raise the 2 percent target rate for overnight lending between banks by at least a quarter-percentage point by December, compared with 55 percent odds a month ago.

Fortunately, central banks do not have to act as a lender of last resort very often. However, recent events suggest to me that we should review very carefully this responsibility in light of the global developments and advances in the nature of our financial markets.

A big drop in weekly jobless claims and surprisingly strong May sales from Wal-Mart Stores were among the main factors lifting stocks Thursday morning.
Brown-Forman Corp. climbed the most in four months, adding 6.6%. The maker of Jack Daniel's whiskey said fourth-quarter profit rose 48 percent, more than analysts estimated, on an increase in overseas sales.
Comtech Telecommunications Corp. rose 3.1%, the highest since Jan. 16. The provider of mobile-data communications equipment to the U.S. Army said third-quarter sales jumped 16 percent to $138.1 million, beating the $129.2 million average estimate of six analysts surveyed.
Martek Biosciences Corp. fell the most since Sept. 7, declining 8.3%. The maker of nutritional oils for foods and baby formula said fiscal third-quarter net income will be lower because of production timing and ordering patterns of several large customers.
Nucor Corp. climbed the most since April 16, adding 4.6%. The largest U.S.-based steelmaker by market value boosted its second-quarter profit forecast amid rising demand for the metal and record prices.
Smithfield Foods Inc. dropped the most since October, losing 3.8%. The world's biggest pork processor said fourth-quarter profit plunged 94 percent as rising grain prices increased feed costs.
UAL Corp. jumped the most since Jan. 23, adding 11%. Credit Suisse Group and Lehman Brothers Holdings Inc. upgraded the shares of the parent of United Airlines, the world's second-largest carrier, a day after it said it would shut its low-fare Ted airline, ground 70 planes and cut as many as 1,100 employees.
Vertex Pharmaceuticals Inc. surged 11%. Cowen & Co. recommended buying shares of the developer of telaprevir, the experimental drug for hepatitis C, because the drug could reach the market sooner than previously forecast and patients may be able to take the oral treatment less frequently than other drugs, making it more competitive.
Wal-Mart Stores Inc. climbed 3.5%. The world's largest retailer said May sales rose more than analysts estimated as record gasoline and food prices drove shoppers to the discount chain.

"Another week's worth ofdata and the uncertainty around growth, inflation and the policyresponse to both, remains as uncertain as ever. Despite Bernanke'sspeech, we are unconvinced that the Fed can actually take any concretepolicy steps about the dollar. The main purpose of the exercise appearsto be one to convince the 'peggers,' particularly the Middle East, tostick with the program and keep recycling their petrodollars into the USfinancial system. We suspect that the current round of macro data, acertain level of softness in commodity prices and a global economy thatdoes not yet appear to be in trouble, will keep the dollar well behavedand more likely trading closer to the $1.54/Euro mark than the$1.60/Euro mark."

"Labor market data for the month of May so far paints a mixed picture heading into Friday's employment report... jobless claims remain quite elevated but have not yet reached levels consistent with deep job losses... We continue to expect a decline in nonfarm payrolls of 65,000 and a rise in the unemployment rate to 5.1%."

The major indices got off to a positive start as presaged by the futures market. The opening gains, however, have been tempered as buyers haven't shown a great deal of conviction.
A 10-year note yield above 4.00% and a rebound in oil prices (+$1.80 to $124.10) have been restraining factors, along with remarks from European Central Bank President Trichet who floated the possibility that the ECB might hike rates as early as next month to counter inflation pressures.

- A small rate hike means like we have done before

U.S. stocks were set to open higher Thursday as oil prices remained short of the record levels that have raised so much inflationary concern.
Airlines Continental Airlines said it would ax 3,000 jobs, out of a total workforce of 45,000, and ground 67 airplanes. In addition, Chief Executive Larry Kellner and president Jeff Smisek have declined their salaries for the rest of the year. Like other airlines, the executives blamed the high cost of fuel for their troubles.
Continental's cuts follow a Wednesday statement from United Airlines, owned by UAL Corp., that it would cut up to 1,600 jobs and ground 100 planes through 2009.
Retail sales Individual retailers were issuing monthly sales reports for May early Thursday, in a key signal about what Americans are doing with the stimulus check they've received over the past month.
Wal-Mart credited the stimulus checks with boosting its sales by 3.9% in May, beating the 1.6% gain expected by Thomson Reuters data.
Costco Wholesale reported a gain of 9% for the month of May, trumping the 6.9% increase projected by Thomson Reuters data. Costco attributed the rise to high gasoline prices, food inflation and the weak dollar.

- 2009 GDP range 1.0-2.0% vs Mar 1.3-2.3%
- current real GDP 2008 forecasts due good 1Q outcome
- Annual 2009 GDP rate masks that Q/Q GDP to recover

- 2009 HICP range 1.8-3.0% vs Mar 1.5-2.7%
- HICP projections for 2008/2009 markedly revised up
- Must recall Staff projections rest on assumptions

The euro rose against the yen on speculation the European Central Bank will signal today it's more concerned about accelerating inflation than slowing economic growth.
The common currency also gained versus the pound after ECB policy makers left the key interest rate at a six-year high of 4 percent
The euro rose against the yen on speculation the European Central Bank will signal today it's more concerned about accelerating inflation than slowing economic growth.
The common currency also gained versus the pound after ECB policy makers left the key interest rate at a six-year high of 4 percent

EUR/USD printed lows at $1.5360 before rate rebounded to $1.5410.

GBP/USD is under pressure, sliding to $1.9460. Later rate rose back to $1.9510.

USD/JPY increased from Y105.20 to Y106.40.

Apart the BOE and ECB rate decisions, the focus will be on ECB’s head Trichet speech at 12:30 GMT.

Cable tracks euro-dollar's rally back above $1.5400, while euro-sterling holds under stg0.7900, edges to $1.9510/15. Offers seen placed between $1.9535/50. Bids now seen placed at lows of $1.9465, more between $1.9455/45.

Says crisis is market correction that's still ongoing.

Resistance 3: Y107.80

Resistance 2: Y106.70
Resistance 1: Y106.30
Current price: Y106.12
Support 1: Y103.80

Support 2: Y103.20

Support 3: Y102.60

Comments: Dollar challenges resistance at trend line from July 2007 at Y106.30. Break higher will accelerate the rise to Y106.70. Below May 28 lows on Y103.85the downside move may extend to Y103.20 and then – to May low on Y102.70/60.

Resistance 3: Chf1.0580
Resistance 2: Chf1.0520
Resistance 1: Chf1.0480
Current price: Chf1.0480

Support 1: Chf1.0360

Support 2: Chf1.0260

Support 3: Chf1.0220

Comments: Dollar rebounds from yesterday’s lows at Chf1.0360 (support) with stronger one at Chf1.0280/60 and around May lows around Chf1.0220. The nearest resistance is yesterday's high at Chf1.0480. Friday’s high around Chf1.0520 is a medium resistance with a break above will target Chf1.0580.

Eases back toward earlier Asian lows of $1.5380, as rate gets a knock lower folowing the release of weaker than expected German manufacturing data. Demand interest placed between $1.5380/70, which are currently under threat, with further further sales Thursday noted between $1.5450/55. Further bids noted between $1.5360/50, stops below $1.5340.

- UK economy facing twin inflation threat - food, fuel

Resistance 3: $1.9850
Resistance 2: $1.9740
Resistance 1: $1.9630
Current price: $1.9496
Support 1: $1.9500
Support 2: $1.9480
Support 3: $1.9350

Comments: Cable remains under pressure, challenging support at session lows on $1.9500, then – at $1.9460. Key support is around May 15 lows on $1.9350. Above yesterday’s peak on $1.9630 there is a room for a rise up to Tuesday’s high on $1.9740 and then – on May highs at $1.9850.

Resistance 3:$1.5760

Resistance 2: $1.5620
Resistance 1: $1.5480

Current price: $1.5425

Support 1: $1.5380
Support 2: $1.5320
Support 3: $1.5280

Comments: Euro rebounds from earlier lows around $1.5380 (strong support). Below losses may widen to $1.5320 and $1.5280. Resistance line is around yesterday’s high on $1.5480, then – Tuesday’s highs on $1.5620.

GBP/USD refreshed session low at $1.9480, remaining under pressure after recent economic data. Pound id also under pressure before MPC’s decision on rate due at 11:45 GMT. Marketexpectsratestayunchangedat 5.0%.

Newswire reports an explosion at a petrochemical facility at Kuwait Port. Crude oil prices bid at $123.05, up 75 cents on bargain-hunting say traders, having reversed earlier fall from $121.61 low.

EUR/USD: $1.5550
USD/JPY: Y106.00, Y104.60, Y104.25
EUR/CHF: Chf1.6140
AUS/USD: $0.9550, $0.9450, $0.9650
AUS/JPY: Y100.00
USD/CAD: C$1.0050

EUR
Bids: $1.5380/60
Offers: $1.5440/50, $1.5480/85

JPY
Bids: Y105.20, Y104.60/50
Offers: Y106.00

GBP
Bids: $1.9500, $1.9480
Offers: $1.9545/55

AUSSIE
Bids: $0.9530
Offers: $0.9600, $0.9630/50

Michael Woolfolk, economist at Bank of New York at Thomson Financial News - "While a positive surprise to Friday's payrolls appears increasingly likely, there is a understandable element of caution ahead of tomorrow's ECB and BOE meetings. Once this event risk has passed, expect the dollar to gain ground on the recent positive US data and in anticipation of a positive surprise to non-farm payrolls."

The dollar rose for a third day against the yen after Federal Reserve Chairman Ben S. Bernanke said an increase in inflation expectations is a ``significant concern.''
The currency also gained against the pound and the Australian dollar as traders increased bets the Federal Reserve will raise interest rates this year.
The euro pared losses against the dollar on speculation the European Central Bank will keep its benchmark rate at a six-year high of 4% at a meeting today. The New Zealand dollar fell the most in five months after the central bank said it was likely to cut rates.

EUR/USD printed lows on $1.5380 before rate rebounded to $1.5433.
GBP/USD is under pressure, sliding to $1.9489. Later rate rose back to $1.9510.
USD/JPY increased from Y105.20 to Y105.70.

Apart the BOE and ECB rate decisions, the focus will be on ECB’s head Trichet speech at 12:30 GMT.
Before that (at 10:00 GMT) Germany manufacturing orders report is schedule to come.

Japan's benchmark stock indices ended Thursday's session lower, but shy of the session's worst levels. The benchmark Nikkei 225 was down 94.45 points, or 0.65%, at 14341.12. The broader-based TOPIX gave up 6.02 points to stand at 1424.45.

Stock market fixing:
Nikkei 225 +226.40 +1.6% 14,435.57
Topix +23.03 +1.6% 1,430.47
FTSE 100 -87.60 -1.45% 5,970.10
CAC 40 -68.64 -1.38% 4,915.07
Xetra Dax -53.70 -0.77% 6,965.43
DOW -13.35 -0.11% 12,389.50
NASDAQ +22.66 +0.91% 2,503.14
S&P 500 -0.50 -0.04% 1,377.15
10yr Note +0.4200 +0.108% 3.940%
NYMEX Crude Oil -2.01 -1.62% 122.30
Gold -1.70 -0.19% 883.80

Japan's stocks rose to the highest this year after automakers posted higher sales in the U.S., and the weakening yen boosted the earnings prospects at companies reliant on overseas markets.
Honda Motor Co. jumped to a six-month high after its Civic became the best-selling car in the U.S. Sony Corp., which gets a quarter of its revenue from the U.S., climbed after the Federal Reserve signaled support for the dollar. Fast Retailing Co., Japan's largest clothing retailer, soared the most in more than four years on a newspaper report it will beat its profit target. Honda, Japan's second-largest carmaker, jumped 8.6%, the highest since Dec. 26. Sales of the automaker's Civic and Accord models exceeded those of Ford Motor Co.'s F- Series pickups in the U.S. last month, the first time any auto has topped the truck in 15 years.
Rising oil prices lifted demand for more fuel-efficient vehicles, helping Asian carmakers outsell Detroit's Big Three for the first time.
Mazda Motor Corp. jumped 9.1%, the biggest gain since February 2006.
Sony jumped 2.8% and Nintendo Co., the world's biggest maker of handheld game players, added 2.8%. Mitsubishi Electric Corp. rose 2.3%, the highest since Dec. 11.
Sumitomo Metal Mining Co., the nation's biggest gold producer, dropped 2.8%, while Inpex Holdings Inc., declined 2.3%.

European stocks fell to a one-week low on speculation banks may need more capital as losses increase, while lower oil and metals prices weighed on commodity producers.
Societe Generale SA slipped to the lowest in two months and BNP Paribas SA sank after Fitch Ratings said the banks may have to raise additional capital as their finances weaken. Royal Dutch Shell Plc, Europe's largest oil producer, slumped to the lowest in three weeks, and mining company Anglo American Plc had its biggest drop in almost two weeks.
Societe Generale declined 1.7%. BNP, France's largest bank, retreated 0.8%. Barclays Plc, the U.K.'s third-biggest bank, slipped 2.3%.
Shell dropped 2.9%, while BP Plc, Europe's second-biggest oil producer, sank 3.9%. Total SA, the region's third-largest, retreated 3.8%.

Stocks closed mix Wednesday as investors eyed falling oil prices, an upwardly revised reading on productivity and talk of more problems for Lehman Brothers.
Lehman Brothers fell for a second session on reports that the company could be forced to sell some or all of itself to another bank due to ongoing balance sheet woes.
United Airlines said it will reduce its fleet by 100 planes and cut as much as 1,600 jobs amid losses related to higher fuel costs.
Intel Corp., the biggest semiconductor company, Hewlett- Packard Co., the largest maker of personal computers, and EBay Inc., the biggest online auction site, advanced as the Institute for Supply Management's service index expanded more than projected.
American Express, the biggest U.S. credit-card lender, rallied the most in a month after predicting profit that topped forecasts. Bank of America Corp. dropped to the lowest since 2002, limiting the market's advance, after Merrill Lynch & Co. reduced earnings forecasts through 2010.
Ambac Financial Group Inc. tumbled the most since April 23. The second-biggest bond insurer will be replaced by Lorillard Inc. in the Standard & Poor's 500 Index after the close of trading June 10.

The dollar traded near a two-week high against the euro on signs the economy is weathering the housing slump and record gasoline prices.
The pound fell to a two-week low against the dollar after a report showed British consumer confidence dropped in May to a four-year low. Еconomists predicted the Bank of England will keep borrowing costs unchanged Thursday. The dollar traded within a cent of a two-week high against the euro as reports showed unexpected signs of resilience in the world's largest economy.
The Institute for Supply Management's index of non- manufacturing businesses decreased to 51.7 last month from 52 in April. The median forecast ofeconomists was for a drop to 51. Company Hiring U.S. companies added 40,000 jobs, followed a revised gain of 13,000 for the prior month that was more than previously estimated, ADP Employer Services said. The median forecast of economists was for a reduction of 30,000.
The European Central Bank will hold its main refinancing rate at a six-year high of 4% Thursday, all surveyed economists predicted. The ECB has kept the rate at that level since June 2007.

EUR/USD held within the $1.5420/80 range after Tuesday’s sell-off.
GBP/USD continued to retreat from $1.9630 to $1.9520.
USD/JPY initially fell from Y105.30 to Y104.50. Later rate rebounded to Y105.30.

Futures on the Chicago Board of Trade show a 63 percent chance the Fed will raise the 2 percent target rate for overnight lending between banks by at least a quarter-percentage point by December, compared with 59 percent odds a month ago.

Resistance 3: Y106.70
Resistance 2: Y106.30
Resistance 1: Y105.60
Current price: Y105.62
Support 1: Y103.80
Support 2: Y103.20
Support 3: Y102.60
Comments: Dollar challenges resistance at session high on Y105.60. Above the target comes at trend line from July 2007 at Y106.30. Break higher will accelerate the rise to Y106.70. Below May 28 lows on Y103.85the downside move may extend to Y103.20 and then – to May low on Y102.70/60.

Resistance 3: Chf1.0580
Resistance 2: Chf1.0520
Resistance 1: Chf1.0480
Current price: Chf1.0430
Support 1: Chf1.0360
Support 2: Chf1.0260
Support 3: Chf1.0220
Comments: Dollar rebounds from yesterday’s lows at Chf1.0360 (support) with stronger one at Chf1.0280/60 and around May lows around Chf1.0220. The nearest resistance is yesterday's high at Chf1.0480. Friday’s high around Chf1.0520 is a medium resistance with a break above will target Chf1.0580.

Resistance 3: $1.9850
Resistance 2: $1.9740
Resistance 1: $1.9630
Current price: $1.9496
Support 1: $1.9500
Support 2: $1.9480
Support 3: $1.9350
Comments: Cable remains under pressure, challenging support at session lows on $1.9500, then – at $1.9460. Key support is around May 15 lows on $1.9350. Above yesterday’s peak on $1.9630 there is a room for a rise up to Tuesday’s high on $1.9740 and then – on May highs at $1.9850.

Resistance 3:$1.5760
Resistance 2: $1.5620
Resistance 1: $1.5480
Current price: $1.5428
Support 1: $1.5380
Support 2: $1.5320
Support 3: $1.5280
Comments: Euro rebounds from earlier lows around $1.5380 (strong support). Below losses may widen to $1.5320 and $1.5280. Resistance line is around yesterday’s high on $1.5480, then – Tuesday’s highs on $1.5620.

High Low Close
EUR/USD 1.5480 1.5419 1.5424
USD/JPY 105.30 104.54 105.24
GBP/USD 1.9636 1.9522 1.9538
USD/CHF 1.0446 1.0360 1.0422

EUR/JPY 162.58 161.71 162.36
EUR/GBP 0.7913 0.7863 0.7892
GBP/JPY 206.61 204.53 205.67
GBP/CHF 2.0469 2.0280 2.0364

Change % Change Last
Nikkei 225 +226.40 +1.6% 14,435.57
Topix +23.03 +1.6% 1,430.47
FTSE 100 -87.60 -1.45% 5,970.10
CAC 40 -68.64 -1.38% 4,915.07
Xetra Dax -53.70 -0.77% 6,965.43
DOW -13.35 -0.11% 12,389.50
NASDAQ +22.66 +0.91% 2,503.14
S&P 500 -0.50 -0.04% 1,377.15
10yr Note +0.4200 +0.108% 3.940%
NYMEX Crude Oil -2.01 -1.62% 122.30
Gold -1.70 -0.19% 883.80

07:00 UK Halifax house price index (May) - -1.3%
07:00 UK Halifax house price index (May) 3m Y/Y - -0.9%
10:00 Germany Manufacturing orders (April) adjusted 0.5% -0.6%
10:00 Germany Manufacturing orders (April) adjusted Y/Y 6.5% 5.1%
10:00 Germany Manufacturing orders (April) unadjusted Y/Y - -5.0%
11:00 UK BoE meeting announcement 5.00% 5.00%
11:45 EU(15) ECB meeting announcement 4.00% 4.00%
12:30 EU(15) ECB press conference
12:30 USA Jobless claims (week to 31.05) 371K 372K
20:30 USA M2 money supply (26.05), bln - +12.7