posted by 4x-news on Jul 21

The major currencies were mixed on the Friday session amid a dearth of fresh economic news. However, the greenback took solace in a better-than-expected earnings report from Citigroup, propping the currency to above the 107-level against the yen to 107.08. Markets lauded Citigroup’s earnings report, which revealed a $2.5 billion loss in the second quarter, considerably better than consensus estimates for a loss of $3.67 billion.

The dollar also benefited from continued weakness in oil which declined for its fourth straight session to $128.91 per barrel amid easing geopolitical tensions. Iran’s foreign minister Mottaki said ¡°there may be talks on both the US founding an interest preserving bureau in Iran and direct flights between the two countries, raising the prospects for improved diplomatic relations and to quell recently heightened tensions.

Meanwhile, Minneapolis Fed President Stern delivered a hawkish tone, saying the Fed cannot delay tightening rates until financial markets are normal, and the economy is growing robustly. Stern added that the Fed’s actions will affect the economy in the future, not at the moment. Despite the current inflationary environment, the economic outlook remains bleak as expressed by Fed Chairman Bernanke earlier this week in which he delivered a downgraded assessment of the economy in contrast to the latest FOMC policy statement. Bernanke warned about significant downside risks to growth in conjunction with continued upside inflation risks. Our outlook remains unchanged and we continue to look for the Fed to remain on hold until December, at which point we anticipate a 25-basis point rate hike to 2.25%.