Could Today?s Weak US Consumer Confidence Survey Trigger Support For The US Dollar And Upside For GBP AUD & GBP NZD?

Modified: Tuesday, 26 March 2013 18:01 BST - Written by Tim Boyer

STORY LINK Could Today?s Weak US Consumer Confidence Survey Trigger Support For The US Dollar And Upside For GBP AUD & GBP NZD?

The US economy took centre stage during today’s session in the foreign currency markets, as commentary from American policymakers and data releases from the world’s biggest economy attempted to prize the headlines away from ‘the Cyprus situation’.

This afternoon’s US Consumer Confidence survey shed more light on Federal Reserve Chairman Ben Bernanke’s comments of last night. Bernanke took to the stage in order to espouse the ultra-loose monetary policy stance which his Bank, along with most of the other leading global central banks, have dogmatically followed for the past four or more years.

Bernanke used his set piece speech to round on critics who have suggested that record low interest rates in the UK, USA and eurozone, amongst other developed economies, have placed the world’s developing nations at a distinct disadvantage because of the severe weakening effect which they have had on the Pound, US Dollar and euro respectively. This has had a negative effect on the terms of trade for less developed economies which rely on exports into the UK/USA & eurozone.

Bernanke asserted that global Quantitative Easing programmes and the low cost of borrowing have actually promoted global economic growth and have benefited economic participants in all of the world’s economies. American policymakers have been advocates of such a ‘trickle-down’ effect for some decades now.

Meanwhile, today’s highly disappointing March edition of the closely-watched US Consumer Confidence survey hinted at the real reason behind Bernanke’s continued support for an ultra-loose US monetary policy – self interest. The survey showed a considerable slump in levels of optimism from US economic participants since last month, suggesting that the recent ‘sequester’ cuts in America have cast a pall of gloom over the world’s premier economy. This may trigger a bout of support for the safe-haven US Dollar in the lead-up to Easter, while the GBP AUD and GBP NZD exchange rates may also register gains as a result.

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