Bernanke talks currencies....

The US Dolar strengthened yesterday afternoon on comments made by Fed Chairman Ben Bernanke.

Breaking with tradition and commenting on currency matters, typically the domain of the Treasury Secretary, Bernanke made clear the US does not want any further USD weakness given the risk this poses to inflation.

Bernanke also commented that interest rates are well positioned to promote growth and stable prices signalling the Fed is done cutting borrowing costs. The dollar rallied 0.2% against sterling and 0.6% against the euro. Oil and gold prices also fell following the comments to $126 and $875 respectively.

Earlier in the day European GDP growth came in stronger than expected at 0.8%, beating analyst forecasts of 0.7% for the first quarter. Investment and construction spending helped the region weather record oil prices and impacts of the stronger Euro.

Annual growth at 2.2% was on par with expectations. Any gains the Euro made were erased by the comments made by Bernanke later in the day.

This morning Nationwide has already released its UK consumer confidence survey which fell to its lowest level since 2004. Cost of living increases and negative housing sentiment continuing to concern consumers.

These are key themes the BOE will be considering ahead of its interest rate announcement tomorrow. The latest Bloomberg economist survey had all 60 polled economists expecting the BOE to leave rates unchanged.

The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

Currencies boosted by Bernanke

The US government bond prices hit one-month highs as investors took heart after Ben Bernanke, chairman of the Federal Reserve, said inflation is easing.

Weaker-than-expected data encouraged the bond bulls who felt Mr Bernanke’s comments heralded interest rate cuts in the face of slowing US economic growth

Testifying before Congress, Mr Bernanke offered a balanced assessment that contrasted with that of other recent Fed members who had emphasised the risks of further rate increases.

While inflation remained the primary concern, he indicated that “the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing of core inflation”.

However, investors focused on a perceived change of tone, as Mr Bernanke listed reasons to expect inflation would slow, including falling energy prices and the potential for accelerating incomes to be offset by higher productivity or lower corporate profit margins.

Investor concerns about the housing market were fuelled as starts data fell 14.3 per cent in January to a 10-year low.

US producer prices were also released, shrinking slightly more than expected in January, as energy prices declined sharply. On Thursday, a weak reading of business conditions in the mid-Atlantic region followed reports showing a surprise fall in industrial output and a surge in jobless claims.

The yield on the 10-year benchmark US Treasury was 1.6 basis points lower on the day at 4.694 per cent, down from 4.815 per cent on Monday. The two-year note yield was 0.9bp lower at 4.835 per cent, down from 4.929 per cent on the week.

The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.