The long awaited speech from Federal Reserve Chairman Ben Bernanke has been the cause of much debate. Due to this, markets have been even more unpredictable than ever. Even gold, a recent safe haven asset has come under pressure. It appears investors now have a whole lot more on their plates as the asset continued to fall over the last couple of days. Whilst gold rose to as high as $1,900 an ounce earlier in the week, it sank as low as $1,756 on Wednesday. So, the question remains, is money safe anywhere?
Pound Sterling – UK Markets
I wouldn’t be surprised if sterling remained relatively unchanged today across the board, barring some unexpected Friday afternoon madness. This morning saw seconds quarter GDP figures left unchanged. In the period from April through to June the economy grew by 0.2 percent, this compared to a year earlier when it expanded by 0.7 percent. However, growth was expected to be relatively stagnant due to factors such as the extra bank holiday in April for the royal wedding and the Japanese tsunami hitting the import of car parts.
US Dollar – US Markets
The head of the US central bank, Ben Bernanke will later give a speech that will be watched by all. Ultimately, investors will be sniffing around for any hint of stimulus. Mainly in the form of quantitative easing. The economy is stuck between a rock and a hard place; with growth stagnant and debt levels a constant concern the government’s options are severely limited.
With the markets on standby there is still quite heavy downward force on the US Dollar.
However, despite all the negativity, the US saw a surprise 4% rise in durable goods orders in July. The rise was fuelled by an increase in car and aircraft orders; a strange anomaly in these markets. Plane orders rose by 43 percent and cars (including parts) rose 11.5 percent. In the midst of all this manufacturing orders remained weak. If you are someone who goes on to read the small print you will see that the remaining data fell short of expectations, further underlying the problems the US economy faces.
Euro – European Markets
Experts from across the pond are doing their best to talk down the euro. However, it could also be noted that Italy for instance has been in crisis for some time now. But, like many of the other eurozone nations manages to pull through. The most recent surge from the euro has gone against the grain of what we predicted but we can draw the conclusion that the US and the UK are facing problems of their own. Perhaps its time the focus was taken off the euro and placed heavily on the US, which in all honesty is an economy in a mess.
Other Currencies – Highlights
The Canadian Dollar weakened to within 2 cents of parity against its US counterpart as demand for higher yielding assets fell. Continuing worries over the state of Europe’s economy is judged to be the cause.
On the flip side of this the Australian Dollar touched a two week high against the Japanese Yen as the Reserve Bank indicated the central bank may hold interest rates, rather than cutting them as was hinted earlier in the year.
Sterling Rises on Hopes of EU Softening Tone on Backstop