Foreign Exchange Rates : UK Growth Figure and Bernanke?s Comments Set to Determine GBP USD and GBP EUR Levels

April 27, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Rates : UK Growth Figure and Bernanke?s Comments Set to Determine GBP USD and GBP EUR Levels

The Pound Euro exchange rate (GBP EUR) is 1.1236. The Pound Dollar exchange rate (GBP USD) is 1.6510.

Today’s session sees a packed schedule of risk events in the currency markets. Perhaps the most significant event comes after the European close this afternoon when the Federal Reserve’s FOMC makes its monetary policy announcement.

It would be a major surprise if the Fed altered interest rates from their current ultra-loose range of 0-0.25%. However, for the first time in the Fed’s ninety seven year history, the announcement will be followed by a press conference by it’s Chairman.

Market rumours suggest that Chairman Ban Bernanke has consulted ECB President Jean Claude Trichet and Bank of England Governor Mervyn King on how to approach the questions and answers session. Bernanke’s comments will be closely monitored for any suggestion that the US Quantitative Easing programme will be halted when the current allocation of QE funds is exhausted in June. Any suggestion to this effect would provide support for the Dollar, which has been under severe selling pressure in recent weeks due buoyant risk sentiment in the global markets.

Elsewhere, this morning’s UK Q1 GDP growth figure will provide direction for the Pound. Analysts expect the quarter-on-quarter figure to show a 0.5% increase in economic activity in the first three months of 2011, following a contraction of 0.5% in the last quarter of 2010. If the figure came in at, or below, 0%, then the UK would technically have slipped back into recession, an outcome which would cause massive Sterling selling pressure. However, a more likely outcome is that the figure will come out slightly above expectations, causing some near-term respite for the Pound.

The Reserve Bank of New Zealand also makes its interest rate announcement tonight, with analysts expecting rates to remain at 2.50%, However, improved New Zealand economic data in recent weeks has raised the chances of a surprise Kiwi rate hike which would surely see the GBP NZD rate trade downwards to test the key two Dollars to the Pound level.

Meanwhile, figures released overnight have shown that Australian prices are rising at a faster-than-anticipated level of 3.3%. This has caused the GBP AUD exchange rate to trade to within touching distance of a record low.

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