| CATEGORY: FX |
Wed 28 Mar 2012
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LONDON (SHARECAST) - Euoropean markets have opened weaker on Wednesday, with the main equity benchmark indices lower by an average of 0.25%.
Last night’s interview with Federal Reserve president Ben Bernanke on ABC News stands out as it has important implications on the market. He commented that increased gas prices may provoke higher inflation in the short-term, reduce consumer spending, and cause lower economic growth but will not hurt the recovery.
Regarding the possibility of further monetary stimulus, he said that no options are ruled out since the future is uncertain and the Federal Reserve (Fed) must be prepared. Bernanke assured that the Fed’s expansive monetary policy will remain necessary in order to reduce unemployment.
In the foreign exchange market, the dollar is recovering against the majors. The dollar had declined after Bernanke left the door open to a possible third phase of quantitative easing.
The euro/dollar is consolidating and now trades at 1.3338, the cable (sterling/dollar) moved away from 1.60 towards 1.5940, and the dollar/yen has dipped below 83 to 82.69.
The euro/yen has eased after falling below 111 yesterday. The euro/sterling rate showed signs of strength at 0.8386 ahead of gross domestic product (GDP) data in the United Kingdom. The euro/Swiss franc remained flat at 1.2060.
Looking at other currencies, carry trade currencies such as the aussie, loonie, and kiwi have fallen versus refuge currencies, such as the dollar, Swiss franc, and the yen. Nordic currencies also declined versus the euro and especially the dollar. The Swedish krona is showing weakness.
The gold price corrects after the bullish rally that took it near $1,700 an ounce.
Looking at macroeconomic references, French fourth quarter GDP came in at 0.2% quarterly and 1.3% annual compared to preliminary readings of 0.2% and 1.4% respectively.
Coming up, Italy will hold a debt auction and will release business confidence data.
In Germany, there will be preliminary CPI readings.
In the United States, there will be durable goods orders and weekly crude oil inventories.
In central bank news, Hungary kept its key interest rate at 7.00% and Turkey kept its own at 5.75%.
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