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Wednesday, June 25, 2008

European Summary

Bond futures contracts drifted in light, rangebound trading Wednesday as markets braced for the FOMC interest rate decision, due 1815 GMT. ECB president Trichet's testimony before the EU parliament provided a brief flurry of activity. September bunds printed a session low after Trichet voiced conazcern that high inflation in the euro zone was becoming entrenched. Trichet later clarified his comments. While not ruling out a rate hike at next week's ECB meeting, Trichet reiterated he didn't envisage a series of rate hikes.

At 1100 GMT, the September bund contract was down 0.18 at 110.40, within a 110.23-110.51 range, while December euribor was unchanged at 94.75. Gilts outperformed bunds, with muted reaction to CBI retail sales volume data, -9 in June from -14 in May, versus forecast -17. At 1100 GMT, September gilts were unchanged at 104.18, in a 103.91-104.20 range, while December short sterling was up 0.035 at 93.75. The FX market took a very hawkish Trichet, with backup comments from ECB's Noyer and Tumpel-Gugerell as a sign that a rate hike next week is a done deal.

EUR/USD held close to the day's high of 1.5602 in the aftermath. The greenback also slipped against sterling, thanks in part to the CBI survey with GBP/USD comfortably back above 1.97. JPY continues to underperform, a positive session for stocks [Europe +0.3% to +0.8%] encouraged risk appettite, EUR/JPY traded just shy of Monday's 11 month 168.38 high while USD/JPY holds just under 108.00. Oil hovers around $137bbl.

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(END) Dow Jones Newswires

June 25, 2008 07:59 ET (11:59 GMT)

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