Foreign Exchange Report : GBP AUD, GBP NZD and GBP ZAR Rates Trade Higher Following Bernanke's Comments

8 Jun 2011 at 9 AM - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP AUD, GBP NZD and GBP ZAR Rates Trade Higher Following Bernanke's Comments

The Pound Euro exchange rate (GBP EUR) is 1.1198. The Pound Dollar exchange rate (GBP USD) is 1.6412. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5403.

Ben Bernanake, Chairman of the US Federal Reserve, spoke at a banking conference in Atlanta last night regarding the state of the US economy and the Fed’s response to the US’s current economic malaise.

Bernanke’s comments failed to set investors’ minds at ease and caused the USD to weaken slightly during overnight trading, with the EUR USD exchange rate rising to 1.4696 shortly after his statement. Market participants were concerned by Bernanke’s observation that, "US economic growth so far this year looks to have been somewhat slower than expected," and were further disheartened when he observed that America’s economy was weak enough to warrant the Fed’s current ultra-loose monetary policy stance.

However, Bernanke pointedly failed to hint at the possibility of a third tranche of US Quantitative Easing when the US’s current asset purchase scheme ends this month. Any mention of such a further loosening of US monetary policy would have sent the Greenback much lower.

Bernanke’s comments have caused a downward move in Asian equities markets overnight, signalling a lull in global risk appetite. The high-yielding currencies have already lost ground because of this and further upside is possible for the GBP AUD, GBP NZD and GBP ZAR rates as today’s European session gets under way.

Elsewhere, yesterday saw the release of some much better-than-anticipated whole of Eurozone Retail Sales numbers. The data showed an annualised expansion in European shop sales of 1.1% in April; analysts had been expecting the number to show no growth at all. The GBP EUR rate traded below 1.1200 in the aftermath of the release, but failed to break significantly below this level. Tomorrow’s BoE and ECB rate decisions are unlikely to have any bearing on the GBP EUR rate, with both central banks almost certain to maintain interest rates at 0.5% and 1.25% respectively.


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