Daily FX Market Outlook by AceTrader 23-6-2011

Market Review - 22/06/2011 21:36 GMT The greenback rises after Fed Chairman Bernanke's post-FOMC press conference http://www.acetraderfx.com The greenback strengthened against its major counterparts after Federal Reserve Chairman Ben Bernanke quashed market's speculation on another round of quantitative easing, boosting demand for U.S. dollar as safe-haven assets. Eur/usd, gbp/usd and aud/usd retreated from session highs of 1.4442, 1.6263 and 1.0651 to 1.4342, 1.6060 and 1.0566 respectively whilst usd/jpy and usd/chf rebounded from session lows of 80.02 and 0.8340 to 80.38 and 0.8431 respectively.

Federal Reserve Chairman Ben Bernanke said 'U.S. economic headwinds might be stronger, more persistent than previously thought; don't know exactly how long is the extended period for extraordinarily low interest rates; extended period is at least 2 or 3 meetings ahead; Fed projects unemployment to come down very painfully, slowly; Fed were to stimulate economy further, it could do more securities purchases, cut interest paid on bank reserves.' 
Federal Reserve's Open Market Committee statements said 'U.S. economic recovery continues at moderate pace but somewhat more slowly than expected; inflation has picked up in recent months but will subside as effects of commodity, energy prices rises dissipate; to keep rates exceptionally low for an extended period, keeps Fed Fund rate in 0-0.25%'. 
Earlier in the day, the single currency retreated from Asian high of 1.4419 and dropped to 1.4354 in European morning after comments from German Chancellor Angela Merkel who said 'countries such as Greece and Portugal have quite long way to go before they return to economic growth and become competitive' and release of weaker-than-expected Eurozone April industrial orders, however, buying interest there lifted price and euro ratcheted higher to 1.4442 in New York morning before easing on profit-taking ahead of Fed's rate decision, euro later fell to 1.4342 after Bernanke's press conference.  
The British pound fell from Asian high of 1.6263 and later nose-dived after the release of the minutes of June 8-9 Monetary Policy Committee meeting which showed the Bank of England's Monetary Policy Committee judged the growth outlook had weakened and some members raised the possibility of future quantitative easing. Investors pushed back bets that the Bank of England would increase interest rates until after May 2012. Cable dropped to 1.6093 in New York morning and later edged lower to 1.6060 on dollar strength. 
In other news, the Bank of England Monetary Policy Committee voted 7-2 to kept rates on hold at 0.5% with new Monetary Policy Committee member Ben Broadbent as expected choosing to vote with the majority and not followed the lead of his predecessor, Andrew Sentance, in calling for higher rates.  
European Central Bank and European System Risk Board (ESRB) President Jean-Claude Trichet said 'most serious threat to financial stability link between vulnerabilities in public finance and banking system; debt problems have potential contagion effects across European Union and beyond; banks will disclose full size of sovereign exposure and by maturity in stress tests; the threat of the debt problems is a red warning signal for stability'. 
On the data front, Eurozone April industrial orders rose by 0.7% m/m and 8.6% y/y versus the economists' forecast of 1.0% m/m and 14.2% y/y respectively. 
Data to be released on Thursday include: 
Swiss trade balance; Germany manufacturing and services PMI; EU manufacturing and services PMI; U.K. CBI distribution trade; U.S. jobless claims and new home sales.

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