GBP Higher Against USD Friday After Bernanke Speech
ICM Brokers | Sep 03, 2012 04:12AM ET
The euro ended the week higher against the U.S. dollar on Friday, as expectations for fresh stimulus measures by the Federal Reserve weighed broadly on the greenback, while hopes for action by the European Central Bank boosted demand for the single currency. EUR/USD hit 1.2636 on Friday, the pair’s highest since July 2; the pair subsequently consolidated at 1.2576 by close of trade on Friday, rising 0.51% over the week. The pair is likely to find support at 1.2464, the low of August 28 and resistance at 1.2679, the high of July 2.
The euro rallied to a two-month high against the greenback on Friday, after Fed Chairman Bernanke said the persistently high rate of unemployment was a “grave concern.” Official data on Wednesday showed that the U.S. economy expanded at a seasonally adjusted annual rate of 1.7% in the three months to June, slightly higher than the preliminary estimate of 1.5%, but remained below the 2-2.5% rate required every quarter to hold the unemployment rate steady. Meanwhile, the single currency also remained supported by expectations that the ECB is working on measures to help stabilize the eurozone's sovereign debt markets ahead of its upcoming meeting on September 6.
GBP/USD
The pound was higher against the U.S. dollar on Friday, after Federal Reserve Chairman Ben Bernanke said the Fed would act as needed to bolster growth, but he stopped short of indicating that a fresh round of stimulus is imminent GBP/USD hit 1.5895, the pair’s highest since August 23; the pair subsequently consolidated at 1.5863 by close of trade, 0.28% higher on the week. The cable is likely to find support at 1.5777, Friday’s low and resistance at 1.5911, the high of August 23 and a three-and-a-half month high.
Speaking at the Fed’s annual symposium in Jackson Hole, Wyoming, Bernanke said the persistently high rate of unemployment was a “grave concern” and reiterated that the central bank was ready to provide additional policy accommodation as needed to shore up growth. Meanwhile, sentiment on sterling remained fragile as concerns over broad economic weakness kept alive expectations for another round of monetary easing by the Bank of England. In the week ahead, the BoE is to hold its monthly policy meeting on Thursday, but is widely expected to leave monetary policy unchanged.
USD/JPY
The U.S. dollar fell against the yen on Friday, after Federal Reserve Chairman Ben Bernanke signaled that the U.S. central bank was prepared to implement more easing measures, but he stopped short of indicating that a fresh round of stimulus is imminent. USD/JPY hit 78.17 on Friday, the pair’s lowest since August 13; the pair subsequently consolidated at 78.37 by close of trade, 0.39% lower on the week.
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The pair is likely to find support at 77.90, the low of August 1 and resistance at 78.83, the high of August 27. Speaking at the Fed’s annual symposium in Jackson Hole, Wyoming, Bernanke said the persistently high rate of unemployment was a “grave concern” and reiterated that the central bank was ready to provide additional policy accommodation as needed to shore up growth.
USD/CAD
The Canadian dollar will drop against its U.S. counterpart after reaching levels that threaten growth. The Canadian dollar is approaching extreme price levels where it is going to have an impact on the domestic economy. The loonie, as the currency is nicknamed for the image of the waterfowl on the CAD 1 coin, rallied 5.2 percent against its U.S. peer since June 1 and matched the strongest level in three months at 98.43 cents per dollar on August 28. It strengthened 0.6 percent to 98.62 cents in Toronto.
The currency trades with a premium because of demand from investors seeking a haven, as well as “strong” fundamentals compared with the rest of the world, Bank of Canada Governor Mark Carney said in an interview with CTV television on August 9. The Canadian currency rose 0.9 percent in the past three months. The yen fell 4.1 percent, the dollar dropped 4.1 percent and the euro slid 2.4 percent, the indexes show.
Investors, including central banks and sovereign wealth funds, have favored the loonie to diversify their holdings and as a haven from the debt crisis in the euro region. Bank of Montreal is Canada’s fourth-largest lender.
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