Pound Dollar Exchange Rate On The Up Following OECD Head Gurria's Comments

Published: Tuesday, 4 September 2012 09:00 BST - Written by John Cameron

STORY LINK Pound Dollar Exchange Rate On The Up Following OECD Head Gurria's Comments

Yesterday’s session saw the optimists amongst the global investment community win the day against their more pessimistic brethren. The voices of the doom-mongers who were pre-occupied by Friday’s dismal assessment of America’s economy by Fed Chairman Ben Bernanke and Saturday’s dismal Chinese manufacturing data were drowned out by the majority of the equities crowd who remain convinced that the world’s major central banks stand ready to pump billions of Dollars of addition funds into the economic system via extended asset purchase schemes.

The optimists concentrated on Bernanke’s assertion that further ‘non-conventional’ monetary policy measures remained on the agenda for the US economy as a tacit green light for QE3. In truth, the Fed Chairman had pointedly avoided making any pre-announcement of a third tranche of QE in the US. With a US Presidential election coming in the next few months, Bernanke remained cautious of making policy announcements on behalf of a potential new incumbent in the Whitehouse. However, with presidential candidate Mitt Romney’s advisers openly questioning whether QE3 would have any tangible effect on the state of the real economy in the States, another slice of asset purchase would appear far from the racing certainty which many analysts consider it to be.

Angel Gurria, the head of the OECD, weighed in to the QE argument yesterday when he openly called for the European Central Bank to enter the bond market in order to purchase Italian and Spanish gilts. The OECD is a widely-respected organisation, so investors took note of Gurria’s comments. The net effect on the day was to see global equities markets register healthy gains, with London’s FTSE 100 and Frankfurt’s Dax both closing up by almost 1%.

The ‘risk-on’ trading environment saw the GBP USD exchange rate edge tentatively closer to the key psychological level at 1.6000. Another day of gains for share markets today could see it there.

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