Sterling, US Dollar and Euro Exchange Rate: The Pound made gains against the US Dollar Exchange Rate, growing to 1.569

Foreign Exchange Rates Currency News - The Pound made gains against the US Dollar Exchange Rate, growing to 1.569The target rate for inflation is 2.0% but currently stands at 1.7% and unemployment is currently above 8.0%.

by Josh FerryWoodard

Sterling / Euro and US Dollar exchange rates

A dovish Fed Press Conference in the US frees the Eurozone from the headlines but the US Dollar replaces the Euro in the cage of concern. US Central Bank Chairman Ben Bernanke kept the interest rate at 0.25% and indicated that it is unlikely to rise until 2014, more than a year beyond its previous guidance, this immediately pushed down Treasury bond yields and stoked media concern that more quantitative easing is fast approaching. Thomas Simons, a money market economist at Jefferies Co. Described Bernanke as having “the finger on the trigger [of quantitative easing].”

The Pound made gains against the US Dollar Exchange Rate, growing to 1.569 (10:36 GMT) on the back of the Fed’s mild monetary outlook. Subsequently the Pound to Euro Exchange Rate has fallen to 1.192 (10:36 GMT) as investors are deterred by the prospect of long term low interest rates on both sides of the pond (it is highly likely that the Bank of England will feel it necessary to keep interest rates down as long as the US does).

Bernanke’s press conference indicated that US inflation is falling further than expected and that economic recovery is not keeping up with growth forecasts: “The framework makes very clear that we need to be thinking about ways to provide further stimulus if we don’t get improvements in the pace of recovery and normalization of inflation.” The target rate for inflation is 2.0% but currently stands at 1.7% and unemployment is currently above 8.0% with projections suggesting it will not drop below this figure in 2012. The ultra-low interest rate of 0.25% has brought in $2.3 trillion in long-term securities since 2008 when it was brought in to help stimulate growth and economic recovery.

In a return to familiar territory, the Eurozone has once more received substantial criticism from a respected economic critic. Speaking yesterday at the World Economics Forum in Davos, George Soros castigated Eurozone leaders for their perceived “lack of understanding of how financial markets work,” and stated that harsh austerity is hopeless when growth is needed: “The trouble is that the austerity that Germany wants to impose will push Europe into a deflationary spiral.”

Soros’ view that the Eurozone is crumbling fast from within, with vast gulfs opening up between member states which make it impossible to govern and subsequently leave fringe government members powerless (he described the EU as “undemocratic”) were echoed by head of UNI Philip Jennings who told the forum that: “Technocrat governments are playing with political gunpowder. The Eurozone is going too far.”

As the summit got under way yesterday Portugal’s borrowing costs rocketed to insatiable levels; 3-year debt yields reached 19.4% and 10-year bond yields reached 14.6%. Following Soros’ remarks the Euro to US Dollar Exchange Rate dropped a cent falling below 1.300, but managed to rally back up to 1.316 (10:36 GMT) when the US Fed speech took centre stage.

Today’s Exchange Rate Data

EU 07:00 – German Consumer Confidence (February)

US 13:30 – Durable Goods Orders (December)

US 13:30 – Leading Indicators (December)

NZ 21:45 – New Zealand Trade Balance (December)

JP 23:50 – Bank of Japan Policy Meeting Minutes

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Article source: http://feedproxy.google.com/~r/ForeignExchangeOutlook/~3/4fmZLhqsIFw/

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