Forex U.S. Review – Dollar gains broadly after Bernanke speech

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The Euro fell against the Dollar after US Federal Reserve Chairman Ben Bernanke said at a press conference that a disorderly default in a European country would roil financial markets and impact the United States. As Dollar gained strength broadly, the Euro was under pressure. The Federal Open Market Committee (FOMC) pledged to keep interest rates near zero in order to help the US economy grow and said it expected the spike in commodity prices to be temporary. It also expected U.S. economic growth to improve in the second half of the year and offered no hint that it is preparing for a sequel to QE2 (quantitative easing). EURUSD fell to a session low after the Bernanke speech to 1.4355 from a high of 1.4441.

Sterling extended losses in to the US session, plunging against the Dollar to a low of 1.6072. The European session high was 1.6261.The Pound has been suffering since yesterday when Bank of England policy maker Paul Fisher made dovish comments basically indicating more quantitative easing and maintaining interest rates at record lows. This cemented the view that the outlook for the UK economy is gloomy.

The Swiss Franc gained against the Dollar prior to the FOMC meeting and announcement of US interest rates as uncertainty in the currency markets forced investors to flee to the safe haven currency. USDCHF dipped to a low of 0.8339 but soon rebounded after the Fed rate decision and Ben Bernanke’s speech gave investors hope that all is being done to help the US to come out of its slump, although keeping in mind it will be a long and hard road to recovery.

The Canadian dollar rose to a one-week high against the greenback just as U.S. Fed Chairman Bernanke was 15 minutes into his press conference. USDCAD spiked down at one point to 0.9714 when he mentioned that “extended period” of very low interest rates means at least two to three central bank policy meetings and could be “significantly longer.”

The Dollar surged to a session high against the Japanese Yen amid broad Dollar strength after the US Fed policy meeting and a press conference later with Fed Chairman Ben Bernanke. Basically U.S. rates were left unchanged according to expectations, and consequently the market translated the no change in the Fed policy rhetoric as a diminished risk to the Dollar. Before Bernanke began speaking USDJPY was at a session low of 80.00 then rose to as high as 80.37.

Gold rose to a seven-week high prior to the US Fed interest rate decision, peaking at $1,557.88. The precious commodity was lifted by uncertainty over Greece’s debt crisis and expectations of loose global monetary policies after the Federal Reserve said the pace of U.S. economic recovery was slower than expected. Meanwhile, a warning from Bank of England policymakers about a possible need for a second round of quantitative easing (QE), drove gold priced in Sterling to a record high. After the FOMC policy meeting, gold prices dropped as Dollar gained strength against most counterparts. Gold dropped to a session low of $1,545.91.

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