Jackson Hole Summit Disappoints Markets

3 September, 2012

Matthew Boyle

Despite confirmation that QE1 and QE3 have boosted growth by 3% and increased jobs by 2 million Bernanke commented that the situation is “far from satisfactory” and with markets relatively unsure how to take this news the dollar took a slight hit. Bernanke left the summit leaving a message to European leaders “to press ahead with policy initiatives to resolve the crisis”. Draghi cancelled his proposed speech to focus on preparing a bond buying scheme aimed at the peripheral Euro zone countries which is expected to be announced September 6th. With Draghi missing on Friday and Bernankes message unclear, this saw the Euro which momentarily strengthened against the Euro and Dollar slowly weaken again in the hours following the summit.

Further action from the Fed and the ECB are expected, with security analysts suggesting the ECB will join the stimulus drive by cutting refi rates to 0.50% although details are unlikely to be clear until after September 12th and the decision of the German courts about the legality of the European Stability Programme (ESM).
Friday also saw action from the Spanish Government who approved new finance reforms and the creation of what is effectively a bad bank – where the increasing toxic Spanish debt can be directed.

All in all it was a volatile end of the week for the major currency pairings. With the Euro-zone crisis seemingly still in full swing with no clear measures or solutions provided at the Jackson Hole summit initial movements in the markets had all but returned to their starting positions on Friday morning. What is certain is that this volatility will remain with so much uncertainty with the future of the Euro-zone and indeed the single currency.

Please ensure you speak to your Currency Index broker to avoid or protect against any sudden market movements and lets all continue to wish the Team GB Paralympians the best of Luck!