The presentation of the Fed Chairman Ben Bernanke at the meeting on the labor market affected dollar on all fronts.
Pessimistic investors interpreted the words of Bernanke, who considers the U.S. economic recovery as too slow, that there is a possibility of new stimulus for it in QE3.
However, this possibility has been recently dismissed by some members of the FOMC at time when the last week’s macro figures with some exceptions began to show the signs of optimism.
A new stimulus for the economy can boost again the inflationary effects that can negatively influence the economy which has never faced such threats before.
With a recession that has been overcome recently, too large money injections can even change a mind of Fed that made clarifications of its policy taking the decisions on interest rates to remain them unchanged until late 2014. The previous deadline was mid-2013.
No prizes for guessing that with the sustainable economic recovery though far from being perfect; an extreme liquidity can lead millions of consumers to retake low-cost loans shortly thereafter. All this appears to be a good stimulus for the nearest future from one point, but from the other – an almost fatal trap giving that the signs of growth are some sort of artificial promoting the consumption but not production.
However, the indicators of industrial production and first of all, capacity utilization show that there is still a lot of labor force that is ready to absorb a larger share of goods and services consumption. From there you can take the Fed if they finally decide to implement a new QE.
Indeed, back to the Forex market it is evident that the leading currencies have gained strength in recent hours, remaining within a movement without clear reversal patterns.
The euro reached the level 1.3390 so far and is able to overcome it in next few hours depending on the NYSE opening where shares fly again on Monday, pushing the single currency, other currencies and commodities.
The similar situation is with the pound sterling which is near 1.60. The franc is very close to the euro and the yen is trading with no clear trend in the area of 82.80. The currencies linked to commodities that also indicated as the Canadian dollar, for example, are traded around 0.99, without leaving a narrow price range; and the Australian dollar is being traded within a new bullish movement exceeding the level 1.05.
The U.S. consumer confidence data released at 10:00 are key to the development of dollar’s trends for the nearest future. Index is expected to be located close to 71 points, i.e. in line with the February data.
