The euro gained against the dollar in early European trading, aided by broad dollar-selling which helped EURUSD to 1.4452. Euro soon reversed all gains as markets began adjusting positions ahead of Bernanke’s speech. Also important data from the U.S. was the main focus. The second estimate of U.S. second-quarter gross-domestic-product figures show expectations are for a lower estimate of 1.1 percent, down from 1.3 percent previously. This pessimism dampened risk sentiment and shifted investors away from risk currencies like euro. The data came out marginally lower at 1.0 percent and accelerated EURUSD fall to 1.4393.
GBPUSD rose early in the session and was little changed immediately after the release of the second estimate of GDP for the U.K. in the second quarter which was in line with expectations. The Office for National Statistics reported that UK growth was 0.2 percent as predicted. Cable soon shifted direction and fell from a high of 1.6340 down to 1.6251 as investors focused on Bernanke’s speech less than two hours away. Sterling fell sharply against the euro after the data as this.
USDJPY plummeted significantly 77.18 to 76.55 in anticipation of the U.S. GDP report which showed the world’s biggest economy is slowing. Little changed after the data, with a slight bounce to 76.68. Also investors are positioning themselves ahead of Bernanke’s speech at 14:00 GMT and are not expecting him to signal immediate further stimulus, but at least expect Bernanke to acknowledge that the Fed is absolutely ready to act. If the Fed does take some kind of measures to deal with the sluggish U.S. economy, even if not QE3, then dollar is still expected to weaken.
USDCHF rose steadily after an early session dip to 0.7891 to peak at 0.7959 The Swiss franc weakened a Swiss leading indicator index fell more than expected, marking a fourth straight month of declines, adding to signs the currency’s recent strength may be hurting the economy and overall growth. EURCHF rose to 1.1471 from an early low of 1.1394.