Central Bankers moving markets

Yesterday saw some very volatile moves on the currency markets brought about by the chairman of the Federal Reserve Ben Bernanke’s testimony in front of a Senate committee, during which he was asked some deep and probing questions about the US’s overall economic policy and more specifically the weapons they have left to combat their lowering growth, raising unemployment and lack of overall liquidity. His answers were obviously well received by the markets, as the Dollar strengthened significantly, causing Euro weakness as well and the Sterling rates against both moved by more than half a percent in less than half an hour. After the testimony had concluded things settled down a bit, and some of the gains/losses were pulled back, but not entirely.

Today sees the release of the Bank of England’s monthly policy statement minutes and also the UK’s unemployment figure. Could another central bank cause significant movements? It seems quite likely as we will get an indication of the bank’s policy towards further Quantitative Easing together with any indication as to whether they have considered following the Europeans in cutting interest rates – both of which would be weakening for the Pound. Unemployment has slightly improved in the last couple of months, so this could cause a bit of Sterling strength if the trend continues, but certainly don’t count on that given the recessionary UK economy.

Have you considered a forward contract for your upcoming currency requirement? We are just off 4.5 year highs against the Euro, with a very uncertain outlook – perfect for booking forward to protect yourself against adverse market movement. Give your Currency Index broker a call to discuss your options.