Forex Europe Review – Euro steady ahead of Bernanke speech

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The euro climbed against the dollar early in the session lifted by rising equity markets and an upbeat sentiment ahead of Fed Chairman Bernanke’s speech tomorrow but then fell back to where it opened. There has been mixed speculation on whether he will signal a third round of quantitative easing (QE3) to help boost the ailing U.S. economy. If he does then dollar is expected to weaken since it will result in flooding the system with more dollars. Investors are playing it safe until tomorrow and are unwilling to short dollar now. EURUSD hit an intra-day high of 1.4474 moving up from the open of 1.4406 and soon fell back down to where to around where it started. Meanwhile a report on German consumer confidence today showed morale has fallen.

GBPUSD opened the session at 1.6369 and was lifted by corporate buying to 1.6396 but weak data brought it back down eventually to 1.6351. CBI realized sales data showed an accelerated decline in high street sales, highlighting the gloomy outlook of the British economy. Investors are also likely to be wary of building long positions in the pound ahead of a speech by Fed Chairman Bernanke at Jackson Hole, Wyoming tomorrow.

The Swiss franc fluctuated against both the euro and the dollar as markets are uncertain ahead of the U.S. Fed Chairman Ben Bernanke’s speech on Friday. If he does hint there will be further monetary easing by the Fed, this will put pressure on the dollar and broadly weaken it. However, some doubt there will be QE3. Also a report released today showed that experts expect the Swiss National Bank to actively intervene in the currency markets to try to cap the record high franc, which kept investors away from holding the franc. This dilemma between the Swiss franc and euro made it see saw from 1.1495 to 1.1445 and back up to1.1512. USCHF also fluctuated from 0.7964 to a low of 0.7909 and finally back up to 0.7982.

USDJPY was very volatile during the session, opening at 77.03 and moved between 76.94 and 77.26. Yen is being quite resilient despite an effort by Japanese Finance Minister Yoshihido Noda announcing yesterday a $100 billion funding program intended to encourage the exchange of yen- denominated funds to foreign currencies. But the measure did little to curb yen strength. Meanwhile, investors are eagerly anticipating Ben Bernanke’s speech on Friday to signal more stimulus measures to boost the U.S. economy, which could result in dollar weakness but this expectation is soon fading and investors will probably wait on the sidelines.