For the US dollar QE is the talk of the town again as focus starts to edge away from Europe, for now
- Category: US Dollar Exchange Rate
- Published on Thursday, 07 June 2012 11:15
- Written by Will Peters
"The market will also be closely watching what Ben Bernanke may say about the US economy this afternoon with prospects for further easing" - Carol Furguson, Fairfax IS.
The US dollar (Currency:USD) is suffering a pullback on global FX markets as investors turn atttention from Europe to the US.
The pound dollar exchange rate is 0.19 pct higher on the day, GBP-USD has risen through the morning session to 1.5530 at 12:05 BST. (Please see our latest FX forecasts on our IMT site, access is Free via our Facebook entrance page).
The euro dollar exchange rate is 0.07 pct higher at 1.2586.
"Markets appear, surprisingly, to have been pleased with the position taken by the ECB not to lower its key lending rates but be ready for action if needed," notes Carole Ferguson at Fairfax IS.
Ferguson says the market will also be closely watching what Ben Bernanke may say about the US economy this afternoon with prospects for further easing either through 'Quantitative Easing 3' or extension of Operation Twist.
The catalyst for more QE is the recent flow of poor economic data from the US with the poor payroll numbers on Friday and continuing concerns on the spill over of the EU crisis.
Any such announcement will boost risk-taking, thus scuppering further demand for the safety of the US dollar.
According to Fairfax gold prices should be an asset class that would benefit in such a situation.
China has also helped turn the tide on negative risk sentiment.
Officials announced yesterday that a tightening of bank capital rules will be delayed to the beginning of next year.
The motivation behind the move is to try and maintain an appropriate level of credit growth.
New banks loans in April dropped 33% from March.
Forecasts on Chinese growth this year are a mixed bag. Recent figures show that Q1 GDP came in at 8.1% but expectations are that growth will now slow again in Q2 and Q3.
The People’s Bank of China is expected to cut interest rates in June for the first time since 2008 amid growing talk of additional stimulus being added in the near future.