Pound To Dollar Exchange Rate Drops After Bernanke?s Negative Assessment

Modified: Thursday, 1 March 2012 08:44 BST - Written by James Fuller

STORY LINK Pound To Dollar Exchange Rate Drops After Bernanke?s Negative Assessment

The Pound to US Dollar exchange rate is 1.5922.

Yesterday’s session in the markets was marked by the return of risk aversion from institutional investors, in spite of the fact that much of the data released on the day bettered expectations.

German unemployment figures for February, released just after the start of the European session, showed that there had been no increase in joblessness over the past month – analysts had been expecting the data to show that 5,000 German workers had joined the massed ranks of the unemployed.

There were more positive indicators regarding the global economic recovery later in the day, with the release of Q4 Consumer Spending and GDP data in the US. Again, both figures beat expectations, with the growth figures providing particular reason for optimism, showing that the world’s largest economy expanded at an annualised 3.00% during the last three months of 2011.

However, the positive data sets from Germany and the US proved insufficient to impress market participants; London’s FTSE 100 closed down by 0.95%, while in the US, the benchmark S&P 500 lost almost 0.50% of its value.

The shift out of risk was triggered by the unexpectedly high demand by the eurozone’s retail banks for cheap 3-year bonds at the second and final ECB LTRO which took place yesterday. Europe’s banks availed themselves of €530bn of low cost financing – a considerably higher figure than had been expected. This served to spook market participants, who fear that the hole in Europe’s banking sector’s finances may be larger than previous estimates had suggested.

Meanwhile, concerns that all is not well with the US economy, despite the encouraging tone of recent data releases, were stoked by Federal Reserve Chairman Ben Bernanke late yesterday, when he suggested to the Committee On Financial Services that the US economic recovery was ‘uneven and modest’. This saw investors scramble for safety-plays, taking the safe-haven US Dollar higher and seeing the GBP USD exchange rate slump to a low of 1.5896 in early trading today.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: American Dollar Forecasts Daily Currency Updates Dollar Po Forecasts