The pound reached a 13 month high against the US dollar yesterday as the dollar continued to weaken against the euro, pound and the yen ahead of Federal Reserve Chairman Ben Bernanke’s testimony.
Analysts expect the dollar to continue to extend losses if Bernanke continues to support monetary stimulus when he testifies to Congress in the next two days.
The euro pushed higher ahead of this week’s meeting of European Central Bank (ECB) policy makers. Recent comments from ECB officials about inflationary pressures has increased speculation that the ECB may increase interest rates sooner than previously thought although it is widely expected to keep its key lending rate unchanged at 1% on Thursday. However, ECB president Jean-Claude Trichet is expected to continue to voice concern about inflationary pressures following the rate decision.
The euro is also been supported by German economic data that continues to exceed expectations. This morning, German unemployment data registered its best result since February 1992.
On the pound, analysts will be keeping a close watch on upcoming UK data later this week such manufacturing and the services sector. If the data comes in weaker than expected, it could put a damper on expectations of a rate rise in the UK in the coming months.
The Reserve Bank of Australia (RBA) has left its main interest rate unchanged at 4.75% for the fourth month in a row as it forecast inflation will remain within its target this year although analysts expect to see one or two rate rises later this year as inflationary pressures feed through the economic system.
Commentary by Tony Redondo
“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.”
